Canada’s federal government has announced plans to move forward with pay equity legislation that will require federally regulated employers to proactively identify and remedy pay inequities in their workplaces. This plan will strengthen existing complaint-based pay equity mechanisms in the federal sector.

On October 29, 2018, Minister for Employment, Workforce Development and Labour Patricia Hajdu announced the tabling of proactive pay equity legislation through the Budget Implementation Act, 2018, No. 2. This announcement forms part of the second phase under the Equality and Growth: A Strong Middle Class budget, which was tabled on February 27, 2018, and outlines the federal government’s highly touted gender-focused budget.

The federal government intends to alter existing pay equity rules in federally regulated workplaces, including those of both private and public sector employers. The new regime will apply to federal employers with 10 or more employees. The government has laid out two sets of requirements: one for employers with 10 to 99 employees and one for employers with over 100 employees.

According to the 2018 budget plan, the federal pay equity legislation would:

  • include seasonal, temporary, part-time, and full-time positions;
  • provide independent oversight;
  • ensure that both wages and other benefits are evaluated in a gender-neutral way;
  • apply to the Federal Contractors Program on contracts equal to or greater than $1 million, and ensure a robust application of federal employment equity law; and
  • repeal the Public Sector Equitable Compensation Act, which subjected pay equity to collective bargaining.

Hajdu’s announcement did not add much to what had already been outlined in the budget. However, she did shed some light on the method of enforcement of the proposed legislation. The government plans to appoint a pay equity commissioner, who will operate through the Canadian Human Rights Commission. The commissioner will be appointed to assist in enforcing the new regime and have the power to conduct compliance audits and impose penalties on noncompliant employers.

Proactive pay equity legislation has existed provincially in Ontario and Quebec for many years. This is the first attempt by the federal government to implement a similar approach.

Currently, the federal government enforces pay equity through a complaint-based scheme. The new regime will put the onus on employers to determine pay equity shortfalls within their organizations. The government will allow employers three years to establish pay equity regimes after the legislation takes effect.

At this point, the government has yet to indicate which method of comparison employers will have to implement. However, employers will be expected to identify the predominant gender in each of their job categories and ensure that employees who perform work of equal value are paid the same. Once the act is in place, employers will have to review their pay equity processes every five years. If pay gaps form in the interim, employers will be expected to pay the difference in compensation retroactively.

We will continue to monitor any further developments as this bill progresses. In the meantime, federally regulated employers may want to consider whether their pay practices are compliant with pay equity principles.


Browse More Insights

Sign up to receive emails about new developments and upcoming programs.

Sign Up Now