On April 26, 2018, the Ontario government passed the Pay Transparency Act, 2018 (the Act), which created a number of requirements for employers with respect to compensation reporting and disclosure to employees and potential employees, as well as compliance compensation reporting to the government, which the government will then make public.
It is worth noting that 2017 marked the 30th anniversary of the enactment of the Ontario Pay Equity Act, which, since 1987, has placed obligations on all Ontario workplaces with ten or more employees to ensure that their compensation practices provide pay equity for all employees in female job classes. Although the Pay Equity Act has sought to redress systemic gender discrimination in compensation for work performed by employees in female job classes for the past 30 years, according to the government of Ontario, the gender pay gap in Ontario has narrowed by only 6 percent since the passing of the Pay Equity Act. Today the gap is about 30 percent.
So what does the Pay Transparency Act change? For starters, the Act prohibits employers from seeking the compensation history regarding an applicant for a position, whether done by inquiring with the applicant personally or through an agent. Notably, the Act does not prohibit an applicant from voluntarily disclosing his or her compensation history to a prospective employer, and where an applicant has done so, the employer may consider or rely on this information in determining the compensation for the applicant. “Compensation” is defined as all payments and benefits paid or provided to or for the benefit of a person who performs functions that entitle the person to be paid a fixed or ascertainable amount.
Nonetheless, the Act allows employers to seek out information regarding the ranges of compensation or aggregate compensation provided for positions comparable to the position for which the applicant is applying. In addition, the Act requires that external job postings include information about expected compensation or the range of expected compensation for the position.
One of the most significant changes arising from the Act is the requirement for every employer with 100 or more employees and every prescribed employer to collect prescribed information for the purposes of preparing an annual pay transparency report. The report must contain information relating to:
• The employer.
• The composition of the workforce.
• The differences in workplace compensation with respect to gender and other characteristics.
Employers with 250 or more employees are required to submit their first pay transparency report no later than May 15, 2020. Employers with 100 or more employees but fewer than 250 employees are required to submit their first pay transparency report no later than May 15, 2021. In addition, employers must post the reports they have submitted online or in at least one conspicuous location in the workplace. The government has stated that it will make available to the public the above-noted pay transparency reports.
As is to be expected, the Act prohibits an employer from intimidating, dismissing, or otherwise penalizing an employee, or threatening to do so, because the employee has made inquiries to the employer about the employee’s compensation, disclosed the employee’s compensation to another employee, made inquiries about a pay transparency report, or taken a number of other actions specified in the proposed legislation.
Significantly, the Act provides that where an employee files a complaint regarding an alleged contravention of the anti-reprisal provisions of the Act, the complaint will be dealt with by arbitration where a collective agreement is in place, or through the filing of a complaint with the Ontario Labour Relations Board.
Compliance officers may conduct compliance audits and investigations, which may include entering and inspecting any workplace or document, or questioning any person, on matters the officer believes may be relevant to the investigation or inspection. The Act also provides for penalties that will be applicable to any contravention of the Act. The nature of the penalties is expected to be set out in the regulations to the Act.
It is worth noting that the Act applies to private and public sector employers, and imposes wider obligations than does Ontario’s Public Sector Salary Disclosure Act, 1996, which requires public sector employers to make public the names, positions, salaries, and total taxable benefits of employees paid $100,000 or more in the previous calendar year.
The Act draws on the experience of other jurisdictions which have passed similar legislation, most notably, some countries in the European Union.
The European Experience
The European Union has been attempting to address the issue of reducing the gender pay gap in Europe for a number of years. In March 2014, the European Commission introduced Recommendation 2014/124/EU, which suggested that every member state adopt at least one out of four specified measures ensuring greater transparency of pay, including an individual’s right to request pay information and compulsory company-level gender pay reports.
A number of Northern European countries as well as the United Kingdom and Germany have introduced pay transparency legislation in response to the recommendation. In the United Kingdom, The Equality Act 2010 (Gender Pay Gap Information) Regulations 2017, came into force on April 6, 2017. These regulations require that all companies in Great Britain with more than 250 employees report their gender pay gap to the Government Equalities Office (GEO). All companies were due to report by April 4, 2018, and publish details of the proportion of men and women in the company who receive bonuses, along with the breakdown of men and women in different pay quartiles on their own website and on the website of the GEO. The reporting revealed industries in which the gender pay gap is widest, and has also drawn public attention to individual companies in sectors such as banking, airlines, and technology who have the most inequitable workplaces.
The Women’s Empowerment Strategy and Significance for Employers
Notably, the Act goes further than does the European legislation, at least in part because it provides for penalties in the event of contravention. It is clear that the Act represents an expansion of employer obligations during hiring and compensation processes and will likely result in culture shifts in some Ontario workplaces. Considering the European experience with pay transparency legislation, it is to be expected that pressure to address pay gaps will also come from companies’ own employeesperhaps even publicly. While monitoring the release of regulations under the Act that are expected to set out additional details, as a first step, employers should consider:
• Performing internal pay equity audits,
• Consulting with legal advisors with respect to strategic considerations relating to audits and reporting.
• Ensuring that hiring and compensation policies are being applied objectively and in a non-discriminatory manner.
Specialty Technical Publishers (STP) has just published an update to its publication Employment Law: Solutions for the Canadian Workplace and provides a variety of single-law and multi-law services, intended to facilitate clients’ understanding of and compliance with requirements. These include:
About the Author
Maria Gergin is a senior associate at Borden Ladner Gervais LLP. She practises labour and employment law and education law, advising employers on a wide range of issues, including workplace harassment investigations, employment standards, policies and contracts, wrongful dismissal claims, health and safety, and human rights issues.