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Normandin Beaudry

Pay equity: the consequences of noncompliance

LinkedIn

There, in black and white

NB Bulletin Vol 13 N. 16, December 2010

In the last year, Quebec's pay equity commission, the Commission de l'équité salariale (hereinafter, "Commission"), has made major efforts to educate and inform employers about their obligations under the Pay Equity Act (hereinafter, "Act") and the measures to be taken to fulfil them. The Commission, the Pay Equity Act and pay equity in general have also been covered extensively and continuously in the media over the last year and a half to inform the employees of their rights.

Although the obligations of employers subject to the Act have changed very little since the original legislation, this second deadline provides them with a last chance to comply and to avoid penalties. In a context where it has become almost impossible to plead ignorance of the law and its obligations, some employers subject to the December 31, 2010 deadline, have not yet started the work necessary to comply with only a few days remaining.

Given the scope of the work and the anticipated costs of compliance, some employers are considering taking the business risk of not undertaking the pay equity process. Considering that a complaint from an employee is necessary to trigger an investigation of the employer by the Commission, the business risk hinges on the probability of a complaint by an employee. Consequently, two variables are to be considered in evaluating this risk:

  • The probability of an employee filing a complaint and its consequences
  • The power of the Commission to act on complaints filed considering its impending dissolution

The probability of a complaint

The probability of an employee filing a complaint against his or her employer depends largely on this employee's a higher level of awareness about pay equity, its potential consequences on his or her compensation and the possible legal actions. This heightened level of awareness is due in great part to the following circumstances:

a) The Commission's communication strategy: In 2009 and 2010, the Commission made efforts to communicate with employers, to educate them about their obligations and to equip them to assume these obligations. Since the beginning of autumn, the Commission has changed its communication focus and is now informing employees of their rights and the legal action available to them to ensure these rights.

b) The role of the media: Pay equity has been a hot topic in electronic, social and traditional media since the spring of 2009. For example, a search on Twitter and Facebook turns up tens of thousands of employee comments and opinions on pay equity indicating a broad base awareness amongst printed and electronic media readers and Internet users.

c) Retroactive adjustments: In addition to the pay adjustments effective December 31, 2010 for some employees, there will also be pay adjustments calculated retroactively back as far as nine years. The amounts owed to some employees can total several thousands of dollars. Employees who receive these adjustments will share the news in their social and family circles. This will constitute an additional source of information on the financial opportunities pay equity seems to offer.

d) Employee comprehension and expectations: The employees understanding and interpretation of the information available will influence their pay adjustment expectations, the understanding of their rights and of their employer's pay equity obligations. Right or wrong, this understanding will influence how they react to the action or inaction of their employer with respect to pay equity.

e) The employer's equity efforts: For every employer, we can assume that a certain number of its employees are aware of pay equity and its potential consequences. These employees will be more attentive to the employer's words and actions with respect to the following:

  • Signs that a pay equity plan or process is under way
  • Quality of information on pay equity in the organization
  • Quality of the employer's answers to their questions
  • The lack of pay adjustments in predominantly female job classes, even if this results from a fully compliant pay equity process.

The consequences of a complaint

The filing of a complaint, regardless of motives, triggers an intervention by the Commission. Generally, the Commission verifies the nature of the complaint and then investigates the overall process conducted by the employer in order to comply with the Act.

In the case of an employer who has taken the risk of not undertaking a pay equity process or has carried it out in a way that reduces or eliminates wrongfully salary adjustments, the Commission will, regardless if the complaint is well-founded or not, require that the employer undertake the pay equity process or redo the work with very specific instructions and deadlines.

In such a case, all pay adjustments would remain effective as of December 31, 2010 and any retroactive amounts would bear interest to the date at which the employer was to complete its original pay equity process. Furthermore, the Commission could also impose an additional penalty, increasing the current interest rate of 5% to about 8%. This penalty would apply to all employees eligible to an adjustment on the date set by the Commission.

The Commission also has the authority to impose fines ranging from $1,000 to $45,000 depending on the size of the company. These amounts are paid to the government of Quebec. The amounts can double in the case of a second offence.

The authority of the Commission to act on complaints filed

The recent provincial budget proposes the dissolution of the Commission and the transfer of its mandate to the Commission des droits de la personne et des droits de la jeunesse (CDPDJ). This has been perceived by many as weakening the Commission's authority thus making it difficult for it to fully assume its role under the Act, particularly the handling of complaints. Employers evaluating the risk of noncompliance are factoring this in their assessment.

In our opinion, it is too early to evaluate the impact of the proposed change. The information gathered at this point is limited and can be summarized as follows:

  • The Commission will be dismantled, but the Act will remain unchanged.
  • The professionals and experts employed at the Commission will join the ranks of the CDPDJ with the same mission as set out by the Act.
  • The CDPDJ has been investigating complaints for a very long time and is perceived by employers having had to deal with it as very strict and tenacious in investigating complaints.

We believe there will be a temporary disturbance in the operations of the CDPDJ and once it has fully integrated its new mandate, it will proceed with diligence in processing the complaints.

Recommendations

Normandin Beaudry strongly recommends to all its clients that they comply with the Act and for those who have not yet undertaken the work involved, to do so before year's end. It is preferable to be recognized by the Commission as being late in completing the required work rather than being an employer refusing to comply with the obligations of the Act.

For those employers who foresee not being on time for the December 31 deadline and wish to minimize the possibility of complaints in early 2011, we recommend developing and deploying a communication plan to inform their employees of their intentions to carrying out the required pay equity process and to proceed with diligence in getting the work done.

The decision to take the business risk of noncompliance is up to each and every employer. It is important to bear in mind that employees, in 2010, are much more aware of their rights regarding pay equity than they were in 2001. The risk should be evaluated accordingly.

 

Please feel free to contact us for additional information.

514.285.1122
 
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Montreal, Quebec, H3B 1S6