Onus is on organizations to prove compliance when dealing with complaints or an audit
Employers that have more than 10 employees in Ontario could be in for a rude and expensive awakening if they’re not complying with the province’s pay equity legislation.
While the law has been on the books for some time (it passed in 1987), even organizations that initially met the legal requirements could slip out of compliance if pay equity plans haven’t been properly maintained.
For organizations, many just emerging from the recession, that’s chilling news. If pay equity hasn’t been addressed and maintained, employers could be looking at up to 20 years of retroactive payouts, with interest, for female-dominated job classes that pay (or paid) less than male job classes of comparable value.
Many employers are now in precisely that position, either because of complaints filed with the Pay Equity Commission by employees or unions or by virtue of the compliance audits being undertaken by the commission.
Since the Pay Equity Act contains no time limits on when complaints can be filed, unions and employees, both past and present, can simply contact the commission and assert pay equity was never undertaken or maintained at an organization. The onus immediately shifts to the employer to prove compliance.
Audits target private sector employers
Even in the absence of a complaint, employers can be caught by not-so-random compliance audits being conducted by the Pay Equity Commission. In the past several years, the audit process has been targeting private sector employers, including retail and hospitality establishments. When contacted, employers are required to produce copies of pay equity plans developed for their organization, separating non-unionized and unionized employees, along with evidence pay equity has been maintained.
In response, many employers are scrambling to either undertake the required analysis or engage a consultant to do so on their behalf. Depending on the number of years of retroactivity required, the price tag associated with the exercise can be staggering in terms of payouts. If there are female-dominated job classes for which pay equity adjustments are found to be owing, entitlement to those adjustments extends not only to current employees of the organization but also former employees who were in those job classes for the years where retroactivity is owing.
Further compounding the financial implications for an organization is the fact interest is routinely ordered on retroactive entitlements at rates in effect at the time the pay equity plan was to have been posted.
In terms of tracking down former employees entitled to a pay equity adjustment, correspondence to a last known address normally satisfies the Pay Equity Commission. In a couple of cases, however, the commission has ordered the employer to take out advertisements in local newspapers asking people who were previously employed by the employer to come forward to claim their pay equity entitlement.
Unions more aggressive
In addition to complaints from individual employees, unions have become much more sophisticated and aggressive in pursuing entitlements under the Pay Equity Act. Even if a union has agreed at the bargaining table that negotiated wage grids are “in satisfaction of pay equity,” those agreements are not binding for the commission and the union can renege on them at any point.
When a union becomes certified and discussions begin with respect to the development of a pay equity plan for the bargaining unit, the union will often argue it cannot possibly negotiate a plan on a going-forward basis until it is satisfied pay equity has been achieved and maintained for members for the period prior to certification.
Any employee who wishes to challenge the degree of compliance of a non-union pay equity plan can do so individually, as a group or through an appointed agent. Consequently, some unions are purporting to act as an agent or representative for employees for the period when they were non-unionized, compelling employers to prove pay equity was not only achieved but maintained under the non-union pay equity plan.
Unions are also aggressively using pay equity non-compliance as a platform for union-organizing drives.
Since pay equity entitlements are not subject to the compensation freeze imposed by the Public Sector Compensation Restraint to Protect Public Service Act, 2010, employees and unions in the public sector are taking a renewed interest in pay equity to see whether increases to compensation can be found through a pay equity complaint. Since retroactivity can extend back for several years, employers will want to be able to demonstrate pay equity has in fact been maintained so no pay equity adjustments are required.
Where female job classes are entitled to an adjustment by reference to their male comparator, decisions of the Pay Equity Hearings Tribunal continue to provide inconsistent direction as to how grids of the female job classes (where they exist) are to be amended to incorporate the required adjustment: Is there to be an equal dollar adjustment to each step on the grid or can the proportional relationships of the grid steps be maintained? A recently filed judicial review application will hopefully provide some clearer direction.
Silver lining for employers
On a more positive note, the tribunal confirmed in a recent decision that, in order to achieve pay equity, the Pay Equity Act does not require equalization — as between a female job class and its male comparator — of the number of steps on the wage grid or equalization of the time required to progress to the top of the grid.
For employers, ignoring or otherwise neglecting these obligations can have a profound and negative impact on the financial bottom line of the organization and, in extreme cases, the very viability of the organization. Just as “ignorance of the law” is no defence, neither is inability to pay.
Carolyn Kay is a partner at the law firm Hicks Morley in Toronto. She can be reached at [email protected] or (416) 864-7313.
