Certain provisions relating to pay equity audits deemed unconstitutionalLinkedIn
There, in black and white
NB bulletin Vol. 17 N. 3, March 2014
On January 22, 2014, the Quebec Superior Court handed down a ruling on a motion to repeal certain provisions of the Pay Equity Act. The court rejected part of the motion, but declared sections 76.3 and 76.5 of the Pay Equity Act to be invalid and of no legal force or effect. This decision affects two elements that could result in additional obligations for employers:
1- In postings, providing more information to employees so that they can evaluate whether or not the audit results are good or bad (article 76.3).
2- Paying compensation adjustments retroactive to the date on which the change creating the gap occurred (section 76.5). Adjustments are currently made every five years when the pay equity audit must be conducted.
In the short-term, this decision does not impact employers’ obligations, especially since the government announced on February 21 that it would be appealing this decision. Therefore, the next ruling will not be handed down for quite some time.
What to do in this situation
A good way to prepare for the changes that could be made to the Pay Equity Act is to be well structured, adopting and applying a compensation policy and practices that promote equity. In addition to preventing gaps when the pay equity audit is conducted, a clear and structured compensation policy will allow for internal, external and individual equity to be established.
Sound total compensation management benefits all organizations and goes beyond pay equity obligations. Good management practices will not only allow organizations to remain compliant with the Pay Equity Act, but will also help them attract and retain top talent.
Summary of the motion
Following the amendments introduced to the Pay Equity Act in 2009, a coalition of unions submitted a motion to the Superior Court to have certain provisions repealed. The motion was to repeal sections1 that would not comply with the CanadianCharter of Rights and Freedoms and the Charter of Human Rights and Freedoms.
This coalition believes that the introduction of sections 76.1 to 76.9 in relation to pay equity audits creates conditions that significantly diminish the rights and advantages conferred to women by the Pay Equity Act in 1996. It maintains that audits conducted every five years do not ensure the discipline required for protecting women’s rights, and that only continuous audits would do so.
What are the potential consequences of the next ruling?
If the Court of Appeal arrives at the same conclusions as the Superior Court, substantial changes to the Pay Equity Act could be expected.
As regards the information communicated in postings, it is conceivable that the legislator would require further details concerning the pay equity audit method, including the nature of the changes that have occurred within the organization since the last audit and the date on which these changes took place.
With respect to the date on which the adjustments apply, it is difficult to predict how the amendments to the Pay Equity Act could be structured. A first assumption would be that a pay equity audit would be conducted each time that a change is made in the organization, and that corrective action would be taken immediately. This would avoid having to pay interest on retroactive amounts owing, but would expose the employer to constant and upward salary fluctuations.
A second assumption would be that the pay equity audit would continue to be conducted every five years, but that ensuing adjustments would be retroactive to the date of the change leading to the gap. This would require comprehensive and constant documentation of even the slightest changes related to jobs in the organization so as to be able to identify the event (and date) resulting in a pay gap.
Keep in mind that several events can generate pay gaps in an organization (for example, the creation or abolition of a job category, an increase or reduction in job tasks, the re-evaluation of job categories, the negotiation of a collective agreement, a salary increase, a merger with or the acquisition of a company, etc.).
If amendments are introduced to the Pay Equity Act, could they be applied to past work?
For organizations that conducted pay equity audits and were not subject to any complaints, it is unlikely. However, for organizations that were subject to complaints of this nature, particularly those for which employees are represented by unions belonging to this coalition, it could be a possibility.
You can consult the ruling here available in French only.
Contested sections of the Pay Equity Act: 14, 23, 28, 30, 32, 35, 36, 37, 40, 44, 49, 52, 53, 54 and 56
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