'It is extremely difficult for a company to deviate from the one-plan rule,' says employment lawyer on pay equity requirements
As the deadline to submit pay equity plans for most federally regulated employers approaches, more organizations continue to bring applications to the Commissioner of Pay Equity to deviate from those requirements.
The latest decision, Sogetel Inc. (Re), 2024 PEC 3, confirms what pay equity commissioner Lori Straznicky has already indicated with earlier decisions: the commission is going to hold employers, even some of the country’s largest organisations, to close interpretations of the Pay Equity Act.
“The legislators were undoubtedly alive to the challenges of creating one pay equity plan in large organizations. Yet, that is what is required by the legislation. Any exception to this requirement must be carefully applied… Establishing multiple plans is an exception to the rule under the act that an employer must create a single pay equity plan for its entire workforce,” wrote Straznicky in her decision.
Federal employers with over 10 employees are required to submit pay equity plans by September 2024; those that wish to deviate from the regulations laid out in the act are responsible for proving the necessity of exceptions to the rule: first, there must be enough male-dominated classes in a proposed group to make a proper comparison with female-dominated groups; second, the deviations must still advance the purpose of the act.
Sogetel, a telecommunications company in Quebec, applied to separate its workforce into two pay equity groups, one for organizational staff and one for executives. The commissioner rejected the application.
“Sogetel recognizes that by including senior executives in the pay equity exercise, the act represents a step forward for pay equity. However, it nonetheless seeks to separate its senior executives from the rest of its operations,” said Straznicky.
Multiple pay equity plan applications
Since the adoption of the federal Pay Equity Act in the summer of 2021, there have been other applications to the commissioner by companies that wanted to submit multiple pay equity plans.
In February of last year, for example, the Canadian National Railway Company (CN) and the four unions representing much of its workforce applied to split its pay equity reports into four parts, of which only two were approved.
A main reason for that decision was that the classes separated employees into union and non-union classes, and most of the typically female job classes were non-unionized, meaning they had less power to negotiate higher wages, 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,” she wrote.
Multiple pay equity plans ‘extremely difficult’
The Sogetel decision is a reminder to employers that attempting to separate employees into different pay equity plans is going to be a high bar to clear, says labour and employment lawyer Ryan Martin with Ogletree Deakins in Montreal.
“In a nutshell, it is extremely difficult for a company to deviate from the one-plan rule,” Martin says.
“The mere fact that you have some employees that are on a set scale or fixed incremental increases, versus unionized employees that have fixed percentages in a collective agreement, I don't think that in and of itself is a reason to not compare the classification to another one where the pay increases are determined otherwise.”
Employers doing ‘end-run’ with multiple plan applications
There are several reasons organizations may be applying for exceptions to the one-plan system, says Sylvia Fuller, professor of sociology at the University of British Columbia, whose research focuses on gender pay inequality.
A cynical view, she says, is that by skirting the one-plan rule, employers are trying to lessen the financial impact of exposing the pay gaps in their workforce.
“They know that doing a particular comparison is going to reveal that the workers in the more female-dominated jobs are not getting compensated at the level which one would expect, given that comparison … it's a comparison that's going to cost them money,” says Fuller.
“The other possible reason is that they just don't want to do the hard work of making comparisons across dissimilar jobs.”
The process of comparing and assessing job classes across more disparate roles, such as an executive and a warehouse worker, can be contentious and time-consuming, she says.
“By narrowing the scope of comparison, they can make that process easier and less contentious. But of course they're also really doing an end-run around the purpose of the act in the first place by doing so,” Fuller says.
“So I'm not surprised, and I'm glad, that the pay equity commissioner seems to be taking a line that, for the most part, these kinds of applications are not okay, that this is what pay equity is about and you have to do the work.”
Executives do not need pay equity plans
Sogetel’s main arguments for two separate pay equity plans were based on the differing ways executives and operational employees are compensated – a fact which did not impress Straznicky.
“The structure and components of executive compensation are often, as Sogetel describes, different than those of non-executive employees. However, the act is designed to overcome those differences,” she wrote.
Sogotel also submitted that having only one pay equity plan would be a disservice to the intent of the Pay Equity Act, by introducing bias into the classification process, “since there is a clear ‘logic’ to the dispersion of the salaries of operational employees along a regression line, which it alleges would not be the case with executives.”
Again, Straznicky found this argument to be baseless, having written in a previous decision on a similar application that “a single plan based on a well-designed job evaluation system will detect the full range of job values and proactively rectify any discriminatory wage practices by investigating the overall relationship between job value and total compensation across a wide range of predominantly male and female job classes.”
She asserted that Sogetel’s situation in regard to executive salaries was not “unique” enough to warrant an exception.
Pay equity not ‘equal work, equal pay’ legislation
Employers may be anticipating negative reactions from workers after pay equity reports are submitted and posted publicly, says Martin. However, any anxiety employees experience around pay equity reporting in their workplace could stem from misinformation around the act and the intent of the reports.
It’s important that employers communicate to employees that pay equity isn’t about “equal work for equal pay” but rather about equal compensation between typically female- and typically male-dominated jobs and classes.
“A lot of it is going to be about the messaging that comes with posting the results. This is a new piece of legislation, the first time that many of these employees are going to be dealing with this type of legislation,” he says.
“I don't think that it should be something we try to hide and work around; I think that you’ve got to just be transparent and upfront with what the results of your evaluation found, and you need to explain the process that you went through, [so] your employees understand why there are changes happening, and why it is that you're posting these reports that show that there are gaps.”
The best way to address negative fallout, Fuller adds, is by addressing the pay disparities. Plus, it’s important for employers to recognize that pay equity – and pay transparency plans – aren’t a “silver bullet” that will solve all gender inequities in the workplace.
Women are systematically “sorted” into organizations that generally pay lower wages, she says. Additionally, due to gender bias — such as mothers being hired at lower rates — wages are only part of the equation.
“Pay equity only looks at those inequities within the organization, it doesn't look at who gets in the door in the first place,” Fuller says.
“It's not a silver bullet, but at the same time, it's important, and it is one of those dynamics that can contribute to these systematic wage inequalities … it's certainly well past time that we should be addressing these inequities and using every tool in the toolbox.”
