Introduction

Recognizing the integral role that pay equity plays in achieving gender equality, the House of Commons Standing Committee on the Status of Women (the Committee) undertook a study on the implementation of the Pay Equity Act (the Act) and the current status of pay equity in federally regulated workplaces. The Committee heard from witnesses during three meetings, held between 8 December 2020 and 25 February 2021 about the implementation of the Act. Testimony was received from the Hon. Filomena Tassi, Minister of Labour, the Pay Equity Commissioner, Karen Jensen, and the Parliamentary Budget Officer (PBO), Yves Giroux, and representatives from this office as well as representatives from the Department of Employment and Social Development and the Canadian Human Rights Commission.

Witnesses spoke about the gender wage gap and the importance and benefits of pay equity in Canada. The Committee heard about some pay equity initiatives at the federal level, as well as an overview of the Act, which received Royal Assent in December 2018, and the progress made towards the implementation of the proactive pay equity regime under the Act. In this report, the Committee provides recommendations to the Government of Canada with the goal of improving the implementation of proactive pay equity through the Act.

Closing the Gender Wage Gap in Canada

In Canada, the gender wage gap persists; the Committee heard that women in Canada earn, on average, 0.89$ for every dollar men earn.[1] Negative stereotypes about the value of women’s work are the basis of systemic differences in compensation between women and men. Diverse approaches to achieving pay equity have been discussed and introduced at the federal level, the most recent being a proactive pay equity regime introduced through the Act in 2018.

The Gender Wage Gap

While women in Canada earn less on every dollar compared to men, the gender wage gap is even larger for certain groups of women.[2] For example, the Pay Equity Commissioner told the Committee:

[R]acialized women working full time earn an average of only 67¢ on the dollar earned by non-racialized men. Indigenous women, on the other hand, earn approximately 65¢ on the dollar for every non-[I]ndigenous male dollar. For newcomer women, it's 71¢ on the male dollar. Disabled women—women living with physical or mental disabilities—are earning only approximately 54¢ on the dollar earned by every male who is non-disabled.[3]

Factors such as part-time employment, precarious work, occupational segregation and stereotypes and bias help explain these larger wage gaps.[4]

The gender wage gap is rooted in negative myths and stereotypes about the value of women’s work that have resulted in discriminatory compensation systems over the years, often unintentionally.[5] The Pay Equity Commissioner explained that the type of unpaid work women often do in their households (caring for children, for instance) has been taken for granted and has not historically been acknowledged as work that contributes to the economy. The belief that women’s work is not as valuable has been slowly integrated into compensation systems.[6] The Committee heard that the review of compensation systems is “essential” to eliminate the effects these negative myths and stereotypes have on women’s compensation.[7]

The Benefits of Pay Equity

Ensuring pay equity or equal pay for work of equal value is an important step in closing the gender wage gap and achieving greater gender equality.[8] The Committee was told that closing the gender pay gap is necessary to ensure Canada’s economic and social recovery from the COVID‑19 pandemic.[9]

Witnesses informed the Committee of the many benefits pay equity can have for women and for businesses and the economy. First, pay equity can have positive effects on the income and economic security of women:[10] in the short term, increased income can improve households’ “buying power”[11] and in the long term it can have positive effects on pensions and retirement savings.[12] Witnesses also stated that pay equity can increase women’s self-esteem.[13]

Second, pay equity can have positive effects on businesses. It can foster greater diversity within companies and in the workplace, as it can help attract talent.[14] For instance, the PBO noted that if average pay is raised for occupations in which women represent the majority of workers, it could become easier for employers to attract and retain employees.[15] In addition, the Pay Equity Commissioner stated that research indicates that “businesses that promote gender equality are in fact more productive, more resilient and better at competing in the marketplace.”[16]

Overview of Past Federal Pay Equity Initiatives

Issues related to pay equity have been discussed in Canada for decades and past initiatives have contributed to the progress made in achieving pay equity. In the early 2000s, several reports on pay equity were produced at the federal level, including the Canadian Human Rights Commission report entitled Time for Action—Special Report to Parliament on Pay Equity[17] tabled in the Parliament of Canada in February 2001 and the final report of the Bilson Task Force entitled Pay Equity: A New Approach to a Fundamental Right submitted to the ministers of Justice and Labour in May 2004.[18] These reports concluded that the existing complaint-based model for pay equity was a challenge for achieving pay equity and recommended that it be replaced by a proactive pay equity regime. To that point the PBO speculated that the complaint-based model was perhaps “too cumbersome for individual employees, mostly female, to complain and have recourse.”^[19]

In June 2016, the House of Commons Special Committee on Pay Equity tabled its report entitled It’s Time to Act,[20] recommending that the Government of Canada draft proactive pay equity legislation, within 18 months of the report’s tabling, that would apply to the federal public service, Crown corporations and all federally regulated companies with 15 or more employees.[21] A proactive model shifts the responsibility onto the employer to “undertake an analysis to determine whether or not there’s a pay gap,”^[22] compared to the existing complaint-based model which requires an employee or their union to bring forward a complaint regarding pay equity.

In addition to these federal initiatives, other jurisdictions in Canada have implemented initiatives or proactive pay equity regimes. For instance, both the provinces of Quebec and Ontario have implemented proactive pay equity legislation.[23]

The Pay Equity Act

In October 2018, the Act was introduced in the House of Commons; it received Royal Assent in December of the same year.[24] Once brought into force, the Act will introduce a proactive pay equity regime applicable to federally regulated employers, replacing the complaint-based system in the Canadian Human Rights Act.[25] In September 2019, the first Pay Equity Commissioner of the Canadian Human Rights Commission, Karen Jensen, was appointed pursuant to Part 5 of the Act; she was reappointed in the fall of 2020.^[26] The Pay Equity Commissioner told the Committee that while the Act is not yet in force, “we are anticipating that [it] will come into force later on in 2021.”^[27] The regulations accompanying the Act, which are necessary to support the Act’s coming into force, were pre-published in the Canada Gazette, Part I on 14 November 2020.^[28] The Minister of Labour, added that a 30-day comment period typically follows the prepublication of regulations. However, given the effects of the COVID‑19 pandemic, this period was extended to 60 days to ensure stakeholders had sufficient time to review the regulations and provide feedback. Over 30 submissions were received, which are being considered during the finalization of these regulations.[29]

Overview of the Pay Equity Act

When the Act comes into force, it will apply to approximately 4,500 employers and will cover 1.32 million employees in federally regulated workplaces.^[30] The Pay Equity Commissioner noted that under the Act, employers are allowed up to three years to develop and implement a pay equity plan, after which point any pay adjustments would begin.[31] The Minister of Labour specified that “there is additional time for companies that have more than 1% to pay to employees, when time runs out that money is still owed.”[32] She explained:

If the cost is significant for that company, it gives that company time to ensure that they can pay those funds, but those funds would be retroactive to the date of the three‑year mark. This is about preserving those jobs. We don't want jobs to be lost in this. We want to ensure that women have more opportunities and more jobs.[33]

If companies were to develop a pay equity plan and have this plan approved before the three-year period, payments would begin at that point.[34] Under subsection 61(2) of the Act, beginning in the third year after the coming into force of the Act, large employers (those that employ 100 or more employees) can “phase in” adjustments to pay over three years, whereas employers with 10 to 99 employees have five years to make any adjustments.^[35] In general, if the Act comes into force in 2021, employees who are eligible for pay equity adjustments would begin to receive them in 2024.

Under the Act, employers or unions must establish a pay equity committee that will work collaboratively to establish, plan and implement pay equity in their workplace.[36] The Pay Equity Commissioner will support the work of these pay equity committees and can offer dispute resolution services when necessary to “support the parties in reaching consensus if they aren’t able to.”[37] The Pay Equity Commissioner noted that while her office can assist in resolving pay equity disputes, the process will proceed more quickly if pay equity committees can work collaboratively:

It will, of course, be incumbent upon employers and unions who are working in a pay equity committee to use a collaborative approach in the development of their pay equity plan to avoid having to come to the Pay Equity Commission, to my office, for assistance in resolving disputes.[38]

If parties are not able to reach an agreement through alternative dispute resolution mechanisms, the Pay Equity Commissioner could “issue a decision.” This decision would have the force of law and then the “questions of law could go to the human rights tribunal, if there were concerns.”[39]

The Act requires employers to “understand assessments and compare the value of work which includes factors such as skills, efforts, responsibility and work conditions,” as such, an appropriate time period must be allotted to this process to ensure it is implemented correctly.[40] The Minister of Labour confirmed that implementing pay equity is a highly complex process for employers:

We're talking about taking jobs that by nature are completely different, and applying criteria to those jobs to determine what the pay should be […] Then there are exemptions, such as seniority or specific programs. In addition to that, you have to determine which criteria, which formula, you will use. Two different formulas are presented, and you have to understand what those formulas are. If those formulas don't work, you have to opt for another formula.[41]

In addition, the significant negative impacts of the COVID‑19 pandemic on the economic wellbeing of many federally regulated businesses across Canada may further complicate the implementation of pay equity measures. The Pay Equity Commissioner asserted that in the context of the COVID-19 pandemic, the three-year period allotted to develop a pay equity plan will allow businesses to “get their feet back under them, economically speaking” while developing their pay equity plans.^[42] The Minister of Labour noted that in the context of the COVID‑19 pandemic, pay equity “is a priority and a foundation stone for building back better.”[43]

The Work of the Pay Equity Commissioner

The mandate of the Canadian Human Rights Commission’s Pay Equity Commissioner is to “promote women’s equality by ensuring that federal public and private sector organizations value work done by women in the same way they value work done by men.”[44] The Pay Equity Commissioner told the Committee: “My goal as commissioner is to demystify pay equity and help employers to see that it is a golden opportunity to demonstrate their commitment to gender equality in the workplace.”^[45]

The Pay Equity Commissioner told the Committee that she has conducted “extensive consultations with unions, employers, women’s organizations and employer associations” to identify and address any concerns that these stakeholders may have regarding the implementation of the Act.[46] Furthermore, employee organizations were consulted to gain insight into how to effectively share the information about employees’ rights to pay equity, regardless of geographic location.^[47] These consultations revealed businesses were concerned about the challenges associated with the technical requirements for implementing pay equity. The Minister of Labour underscored the important role of the Pay Equity Commissioner in working collaboratively, through consultations, to ensure the successful implementation of the proactive pay equity regime.[48] The Pay Equity Commissioner indicated that the Pay Equity Division of the Canadian Human Rights Commission is committed to providing support to these businesses as they implement pay equity.^[49] The Committee also heard about a new mandate—proactive compliance—for the Canadian Human Rights Commission: Jeff Willbond is the first director general for proactive compliance, responsible for compliance and enforcement under the Act and the Accessible Canada Act.^[50]

In response to these consultations, educational materials, guidance documents and tools are being developed with stakeholders to ensure that implementation of the Act will work well for employers and employees.^[51] For example, the Pay Equity Division of the Canadian Human Rights Commission is developing tools that will help small and medium-sized enterprises develop their pay equity plans; for example, an Excel-based tool is being developed to help employers determine if they have a pay gap to address and, if so, how much must be invested to fill the gap. As well, the Pay Equity Division is developing tools to help explain to employers and unions the various obligations and requirements under the Act, as well as the “techniques and methods” used in the Act.^[52] Finally, the Pay Equity Division has developed a communications plan that uses traditional media and social media, among other approaches, to share information related to pay equity rights with employees across Canada.^[53] The Minister of Labour underscored the importance of the work of the Pay Equity Commissioner and the Pay Equity Division, in ensuring that employers are supported “every step of the way.”[54]

The Office of the Parliamentary Budget Officer’s Costing Analysis

The PBO shared with the Committee the findings of a 2020 report prepared by his office entitled Fiscal Analysis of Federal Pay Equity. This report provides an “overview of the spending measures associated with the Government of Canada’s proactive pay equity regime within the federal public and private sectors.”[55] The Office of the PBO estimated that the new pay equity regime, if fully implemented, would increase compensation by $621 million starting in 2023–2024, particularly for compensation for positions traditionally held by women.[56] In addition, the Office of the PBO estimated the ongoing cost for regulatory oversight of the new pay equity regime to be $5 million and the cost for its ongoing administration to be $9 million.[57] The Minister of Labour indicated that the Government of Canada has designated $26.6 million over six years, and $5.8 million per year ongoing, in the 2018 Fall Economic Statement for the oversight and administrative costs of the pay equity regime.[58]

However, the PBO explained that these estimates are based on public data and that his office did not have access to disaggregated and detailed data it needed to accurately estimate the costs of the implementation of the Act.[59] He added that the estimates are based on data for the core public service, which accounts for only 30% of the federally regulated workforce. Since the data used excludes Crown corporations, the Prime Minister's and ministers' offices, parliamentary institutions, and the private sector, the PBO explained that the new pay equity regime’s effects “on all federally regulated workplaces will likely be substantially greater.”[60] The Committee heard that the Government of Canada indicated in the Act’s accompanying regulations that were published in November 2020 that the total costs associated with the regulations would reach “$2 billion at net present value” in the private sector over a 10‑year period.[61]

The PBO told the Committee that his office requested “specific information on the number of employees by classification group and the composition, whether it's female-dominated or male-dominated,” but that the Government of Canada would not provide it because of cabinet confidence.[62] The Minister of Labour confirmed to the Committee that cabinet confidence was the reason given by the President of the Treasury Board for not sharing the information requested by the PBO.[63]

In order to have a better estimate of the expected increase in compensation stemming from the implementation of the new pay equity regime, the PBO suggested that “[p]arliamentarians may therefore wish to encourage the federal government to provide estimates of expected increases to federal public service employee salaries, along with analysis of the potential impacts on pensions and other future benefits.”[64]

Recommendation 1

That the Government of Canada formally recognize its participation in gendered wage discrimination and violation of the Canadian Human Rights Act and move forward with its commitment to address this inequality by implementing the Pay Equity Act.

Recommendation 2

That the Government of Canada review and amend its regulations to shorten the three years given to design a plan to address pay equity in federally regulated workplaces; and shorten the timeline to implement the plan from the current three or five years depending on the companies’ size.

Recommendation 3

That the Parliamentary Budget Officer be granted the right to obtain any information requested by their office for the purpose of fulfilling the legislative mandate in a timely manner without hinderance of redactions or outright refusal supplying the information.