The Ontario Pay Equity Audit
or What to do BEFORE the Review Officer Calls
Do you have a hidden retroactive Liability?
Pay Equity legislation requires employers to establish and maintain Pay Equity, which requires comparison of pay rates between different jobs. This may include responsibility for the pay rates of employees inherited from an organization that has been purchased or merged. Remarkably few purchases include due diligence regarding Pay Equity obligations.
An employer may face an Ontario Pay Equity Commission review on the basis of an employee complaint, or an audit. An audit means checking pay equity back to the early 1990's, or the formation of the Employer if more recent. Essentially, the employer is deemed guilty until it can prove to a Review Officer that it is innocent - by providing a compliant Pay Equity plan and evidence that it has been maintained in each year since it was implemented.
The difficulty of doing this (many Employers destroy records after 7 years) and the cost of retroactive pay increases, will not worry the Pay Equity Review Officer: it is the employer's problem. Solutions to missing records will be provided by Review Officers, and may involve advertising in the newspaper for ex-employees, and assuming that any pay equity increase due in the earliest year for which records are available is due for every year for which they are missing.
What is Pay Equity About?
In simple terms, it means comparing the pay of women's jobs with that of men's jobs. So the job of a woman in the Accounting Department may be compared with the job of a man on the Manufacturing Line.
It goes far beyond "Equal Pay for Equal Work", and the typical Employer's response "We don't discriminate, we pay the same to men and women for the same work" is irrelevant. So is the argument that the employer is paying the market rate.
The Employer is required to demonstrate that Pay Equity, which means total pay (including the cost of benefits) between "female job classes" and "male job classes", was achieved and maintained. This will likely mean providing:
- A Pay Equity Plan that was posted - likely 10 to 20 years ago - for all employees to see.
- Evidence that a Gender Neutral Job Evaluation system was used to establish the relative worth of jobs.
- Evidence that the system has been maintained for each year since, as jobs, pay rates and benefits changed.
What can Pay Equity cost an Employer?
There is no cap to what must be paid out, nor are payments restricted to existing employees.
Ability to pay is not the concern of a Pay Equity Commission Review Officer.
What if we have a Union?
Pay Equity legislation supercedes the union contract. Unions may agree contracts, often over many years, before raising the topic of Pay Equity. The effect is the Employer may have to agree a further increase.
Unions are equally responsible for implementing Pay Equity, but they can agree contracts that turn out to be non compliant -for years - actually, decades - and then raise the topic of Pay Equity implementation or maintenance. Of course, the employer, not the Union, is responsible for the cost of retroactive and current pay increases.
What should the Employer Do Now?
- Immediately stop the destruction of pay equity or payroll records, even if the accounting department doesn't need them any more. Putting any Pay Equity records in boxes marked "NEVER DESTROY is also a very good idea: there is no sunset clause in the legislation.
- Search for old Pay Equity data, pay rates or ranges, and job descriptions.
- Carry out a confidential audit to determine where you stand. (We can help at this point.)
- Prepare and implement a Pay Equity Program to become compliant. (We can help here, also.)
- If all this is difficult to believe, check with a lawyer specializing in Ontario Employment law. (We are not lawyers, we are consultants specializing in pay programs that meet employers' needs, including Pay Equity. We often work with the Employer's legal counsel.) While waiting to check with your lawyer: stop the destruction of pay equity or payroll records!
UNTIL THE EMPLOYER HAS A PAY EQUITY PROGRAM IN PLACE, EVERY CHANGE IN PAY RATES OR JOB CONTENT COULD BE INCREASING THE EMPLOYER'S RETROACTIVE LIABILITY