New “Equal Pay for Equal Work” Provisions in Ontario Limit Ability to Vary Employees’ Pay Based on Employment Status

by Bennett Jones LLP
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On November 28, 2017, Ontario’s Bill 148, the Fair Workplaces, Better Jobs Act, 2017, received Royal Assent. While some major changes have already come into effect, others are just around the corner.

This is the third in a series of posts providing a practical overview of the Bill 148 changes to Ontario’s Employment Standards Act, 2000 (ESA), legislation that establishes the minimum rights and obligations of provincially-regulated employees and employers in Ontario. Our first post summarizes the changes to Ontario’s statutory leaves of absence under the ESA. Our second post outlines the changes to employee minimum wage, overtime and public holiday pay. Our third post details the expanded scope of “equal pay for equal work”, which comes into effect on April 1, 2018.

Changes to the ESA’s Equal Pay for Equal Work Provisions

For the past 40 years or so, the ESA has had equal pay provisions aimed at ensuring that employers pay men and women performing similar work equally. For example, if there was a male nurse and a female nurse performing substantially the same job, pay equity existed to ensure they were paid the same.

On April 1, 2018, Bill 148 will expand the scope of this concept so that employers must pay Ontario employees performing similar work equally, regardless of an employee's sex and employment status. “Employment status” in this context refers to differences in the number of hours worked by employees, or in the term of employees’ employment, whether permanent, temporary, seasonal or casual. So, for example, Bill 148 will apply the equal pay protections to job categories such that an employer cannot pay a full-time nurse more than a part-time nurse when the roles they perform are substantially the same.

New Rule as of April 1, 2018

Employers can no longer pay an Ontario employee a different “rate of pay” than his/her co-workers simply because of the employee’s employment status where:

  1. the employees perform substantially the same kind of work in the same establishment;
  2. their performance requires substantially the same skill, effort and responsibility; and
  3. they work under similar working conditions.

Under the ESA, “establishment” means a location at which an employer carries on business. If an employer carries on business at more than one location, separate locations will constitute one establishment if: (a) the separate locations are in 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.

Exceptions to the New Rule

This new rule will not apply if an employer can show the difference in pay rates is because of a:

  • seniority system;
  • merit system;
  • system that measures earnings by quantity and quality; or
  • any other factor other than sex or employment status.

In addition to the exceptions above, there are a limited number of positions exempt from the equal pay for equal work provisions, including an employee who is a student under 18 years of age and who does not work more than 28 hours a week.

Rate of Pay “Rate of pay” is not defined. However, it likely requires the same wage rate (but not the same level of benefits or other entitlements such as health benefits or a car allowance).
Review of Pay Rates

Employees who believe they are receiving unequal pay because of their sex and/or employment status will have the right to request a review of their pay rates. As of today’s date, there is no guidance on the number of times an employee can make this request.

In response to a request, an employer can either: (a) increase the employee’s pay rate; or (b) provide a reason, in writing, for the pay difference. An employer cannot reduce another employee’s pay rate to ensure the “equal pay for equal work” rule is met.

As of April 1, 2018, temporary help agency employees in Ontario must be paid at the same rate as existing help agency client employees performing substantially the same work.

For unionized employees in Ontario, the equal pay provisions summarized in the chart above will not come into effect until the earlier of: (a) the expiry of the applicable collective bargaining agreement; and (b) January 1, 2020.

Practical Implications for Ontario Employers

To ensure compliance with these changes and to minimize the impact of these changes, provincially-regulated employers in Ontario should consider taking steps to:

  • Remember that the new provisions in the ESA limit the ability to vary pay rates based on “employment status” (e.g., full-time vs. part-time) but do not apply to differences in pay rates between employees of the same status (e.g., no right of full-time employee “A” working 40 hours per week to request wage review relative to full-time employee “B” working 40 hours per week).
  • Review current workforce in Ontario to determine if any employees at an establishment are performing substantially the same kind of work requiring substantially the same skill, effort and responsibility under similar working conditions and are being paid different rates.
  • If “yes” to the point above, then determine if any exceptions (e.g., seniority system, merit system, etc.) apply. If none of the exceptions apply, consider increasing pay rates before a wage review request and to ensure employees are being paid equally, regardless of their employment status.
  • Prepare for and anticipate part-time/casual employees asking to have their rate of pay reviewed, in which case you will want to:
    • carefully draft job postings and job descriptions, which can  be used later on to justify differences in pay rates (e.g., this will assist in pointing to “any other factor” to distinguish roles);
    • carefully document performance management and employee evaluations, which can be relied on later to differentiate between the quality of work of employees;
    • determine standardized procedures for how employee wage review requests will be handled and how decisions will be communicated; and
    • as there is no guidance on what “other factor” means, be prepared to justify differences in pay rates, but ensure that any factor you wish to rely on to explain a difference in wages paid for similar work does not discriminate against employees.

Stay tuned for our next post, which will discuss the Bill 148 changes to minimize misclassification issues. These changes may impact your use of independent contractors and interns.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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