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The Pay Equity Act and Pay Equity Obligations in Ontario

What is Pay Equity? Ontario’s Pay Equity Act states that the purpose of the act is to “redress systemic gender discrimination in compensation for work performed by employees in female job classes.” What does that mean, and how does it differ from the rules on “equal pay for equal work” that are found in the Employment Standards Act, 2000 (“ESA”)?

What is Equal Pay for Equal Work Under the ESA?

Under the ESA, employers are prohibited from paying an employee of one sex less than an employee of the other sex when the following conditions are met:

  • They perform substantially the same work, but it does not have to be exactly the same
  • They work in the same establishment
  • Their work needs substantially the same skill, which considers the knowledge, physical skills or motor skills required
  • Their work needs substantially the same effort, which considers the physical or mental effort required
  • Their work needs substantially the same responsibility, which considers the number and nature of responsibilities and the authority of the employee
  • They work in similar working conditions, which considers the working environment and exposure to hazards

The ESA also clarifies that, in some instances, paying different wages to employees who are different sexes and meet the above criteria is allowed.

A difference in wage is permitted if it is due to:

  • Seniority, where an employee may earn more due to a longer length of service than another employee
  • Merit, where an employee may earn more than another employee based on evaluation of job performance
  • Earnings based on quantity or quality of production, where pay is directly correlated to a quantifiable output
  • Another factor that is not sex

Equal pay for equal work under the ESA addresses when a worker gets paid less than another worker who performs a similar job due to their sex. This differs from pay equity, which looks at the type of work that is typically done by a particular sex.

What is Ontario’s Pay Equity Act?

Ontario’s Pay Equity Act addresses gendered job classes rather than individual workers. In order for pay equity to be achieved under the Pay Equity Act, female job classes must be paid at a rate that is at least equal to that of male job classes that have similar responsibilities or are of similar value to the organization.

Who Does the Pay Equity Act Apply To?

The Pay Equity Act is applicable to all private sector employers in Ontario with 10 or more employees and all public sector employers.

What is a Job Class Under the Pay Equity Act?

A job class consists of roles that are located in one establishment and have many similarities, including:

  • The duties of the roles
  • The responsibilities of the roles
  • The required qualifications for individuals in the roles
  • The hiring practices when filling the roles
  • The compensation in the roles

What Makes a Job Class Female or Male?

Under the Pay Equity Act, a job class is usually considered a female job class if at least 60% of the members of that job class are female. A job class is usually considered a male job class if at least 70% of the members are male.

How Are Job Classes Compared in the Pay Equity Act?

There are several methods that are used to determine whether different job classes can be used as a comparator to determine if pay rates are equitable.

Job-to-Job Method: Two job classes can be used as direct comparators if the work that is done by the members of the job classes are of equal or comparable value.

Proportional Value Method: If it is not possible to directly compare a female job class to a male job class using the job-to-job comparison method, then the female job class can be compared with a representative group of male job classes.

Proxy Method: If there are no job classes in the organization that can be used for a comparison, an employer can compare female job classes to a proxy establishment with job classes in the same geographic area.

What Happens After Pay Equity is Reached?

After an employer achieves pay equity and meets their pay equity obligations under the Pay Equity Act, they must take steps to ensure that compensation continues to be equitable. Employers are responsible for evaluating whether there are inequities in their pay practices on an ongoing basis. For example, if there are increases in pay rates for male job classes but not comparable female job classes, an employer must take steps to adjust the pay rates for the female job classes accordingly.