The new ‘equal pay for equal work’ provisions in Ontario

Rules have potential to significantly impact how employers structure, pay workforce
By Lisa Bolton and Gerald Griffiths
|Canadian HR Reporter|Last Updated: 05/31/2018

Bill 148 introduced significant amendments to Ontario’s Employment Standards Act, 2000 (ESA). One of the most dramatic is the introduction of the “equal pay for equal work” provisions. Prior to Bill 148, the ESA did not require an employer to compensate a part-time, temporary, casual or contract employee the same as a full-time employee doing substantially similar work. Bill 148 changed all of that.

Effective April 1, 2018, section 42.1 of the ESA now provides that no employer shall pay an employee at a rate of pay less than the rate paid to another employee of the employer because of a difference in employment status when:

•  they perform substantially the same kind of work in the same establishment;
•  their performance requires substantially the same skill, effort and responsibility; and
•  their work is performed under similar working conditions

What is “difference in employment status”?

Often misunderstood, “equal pay for equal work” does not require an employer to ensure wage parity among all similarly situated employees; only that there not be a difference in rates of pay because of a difference in employment status. 

“Difference in employment status” is defined in the ESA as (a) a difference in the number of hours regularly worked by the employees, or (b) a difference in the term of employment, including a difference in permanent, temporary, seasonal or casual status (such as part-time or full-time).   

For example, where an employer has two permanent, full-time employees, there is no difference in their respective “employment status” — both are permanent, full-time employees. As such, the equal pay provisions are not engaged.

The exception is where the rate of pay differs only by reason of the employee’s sex. That basis for a differential is still prohibited under the ESA even if the employees have the same “employment status.”

By contrast, if an employer has a full-time employee and a part-time employee, those employees have a different “employment status.” The equal pay provisions are therefore engaged, subject to certain exceptions set out in the ESA (see “Exceptions” below).

Different locations

An employer may believe it has satisfied the equal pay requirements because it pays part-time and full-time employees the same rate of pay at a particular location. However, the definition of “establishment” under the ESA can include multiple worksites.

As such, an employer with multiple locations may need to compare rates  of pay across locations. 

The ESA defines “establishment” as “a location at which the employer carries on business but if the employer has more than one location, separate locations constitute one establishment if (a) they are within the same municipality, or (b) one or more employees at a location have seniority rights that extend to the other location under a written employment contract whereby the employee or employees may displace another employee of the same employer.”

“Rate of pay”

Recall that section 42.1 provides “No employer shall pay an employee at a rate of pay less than the rate paid to another employee of the employer because of a difference in employment status.”

The ESA does not define “rate of pay.” However, we believe it is likely to include an employee’s hourly rate, salary, commission or overtime rate, but not benefits, vacation entitlement or similar “perks.”

Exceptions

Rates of pay may differ on the basis of: (a) a seniority system, (b) a merit system, (c) a system that measures earnings by quantity or quality of production or (d) any other factor other than sex or employment status.  

A seniority system: Seniority is traditionally considered an employee’s length of service with an organization. However, the Ministry of Labour has recognized that a wage grid providing for a pay increase based on hours worked, and not just years of service, will also be accepted as a “seniority system” for the purposes of the ESA.

This may be a model employers find attractive, depending on how they structure their work. 

A merit system: “Merit system” is not defined in the ESA. However, these words were given meaning under the pre-Bill 148 equal pay provisions (related to equal pay on the basis of sex).

An employer seeking to rely on this exception will likely need to establish (a) all affected employees are aware of the merit system plan, (b) objective appraisal criteria have been established under the merit system, and (c) the system is applied equally to employees of all status.

“Any other factor”: “Any other factor” must be objective. For example, paying a full-time employee more than a part-time employee performing similar work because the full-time employee is better liked by management is not likely to be defensible.

By contrast, paying a full-time employee more than a part-time employee performing similar work because the full-time employee has greater experience is likely to be defensible.

Temporary help agencies

Section 42.2 of the ESA prohibits a temporary help agency from paying an assignment employee a rate of pay less than an employee of a client where (a) the employees perform substantially the same kind of work in the same establishment; (b) the job requires substantially the same skill, effort and responsibility; and (c) work is performed under similar working conditions.

In this case, the “employment status” (such as part-time or full-time) of the assignment employee is not a factor.

If a full-time assignment employee is paid less than a full-time employee of the client, performing substantially the same work, the pay differential may constitute a violation of the ESA.

An assignment employee may be paid less than an employee of a client if the differential is based on any factor other than sex, employment status or assignment employment status.

Disclosing pay information

Under section 42.1 of the ESA, an employee has the right to request a review of his rate of pay. Similarly, section 72 of the ESA protects an employee from reprisal for requesting information about the rate of pay paid to another employee, either from the employer or another employee directly.

However, neither of these provisions create a positive obligation on an employer to disclose another employee’s rate of pay upon request.

If an employee requests a review of her rate of pay, an employer is required to conduct the review and either make an adjustment to the employee’s rate of pay or provide written reasons if no adjustment is provided. 

Collective agreements

The equal pay provisions may conflict with the rates of pay found in an existing collective agreement. In that case, the collective agreement rates are “grandfathered,” provided the agreement was in force as of April 1, 2018.

However, the equal pay provisions must be complied with following the expiry of the collective agreement or as of Jan. 1, 2020 (whichever is earlier).

Final thoughts

Needless to say, the new equal pay provisions can significantly impact how an employer structures and pays its workforce. The minister of labour has promised to commence a review of the equal pay provisions by April 1, 2021. At that time, employers and other stakeholders will have an opportunity to provide feedback and recommend changes.

Until then, Ontarians go to the polls June 7. The results of that election could profoundly impact the Bill 148 amendments, including “equal pay for equal work.” Stay tuned.

Lisa Bolton and Gerald Griffiths are lawyers at Sherrard Kuzz, an employment and labour law firms representing management. They can be reached at (416) 603-0700 (main), (416) 420-0738 (24-hour) or by visiting www.sherrardkuzz.com.

Source: Statistics Canada