Pay Equity: Do You Know Your Obligations?
EMPLOYMENT LAW BY: Earl Altman

The Pay Equity Act is intended to eliminate gender based wage discrimination in the workplace. The Act applies to all employers in the private sector in Ontario who employ ten or more employees, and all employers in the public sector. It is interesting to note that an employer cannot avoid application of the Act by reducing its workforce as the Act provides that it will apply to all employers who had ten employees at any time after the Act came into force.

The Act requires employers to undertake comparisons between each female job class and each male job class in their company to determine whether there is systemic gender discrimination. The comparisons are to be based on the value of work performed, having regard to a composite of the “skill, effort, and responsibility normally required in the performance of the work and the conditions under which it is normally performed.” The Act deems that an employer will have achieved pay equity when the disparities in compensation identified by the comparisons the employer is required to undertake have been redressed. The employer is also required to establish and maintain a compensation system that, as much as possible, provides for pay equity.

The regime for employers in the private sector with one hundred or more employees is somewhat stricter. In such cases, a pay equity plan must be prepared and posted in the company’s place of business. This pay equity plan must identify those classes of female employees who are under compensated, and set out a plan by which these employees will receive pay increases in order to achieve pay equity. Employees are entitled to object to the pay equity plan by filing a Notice of Objection with the pay equity commission within thirty days of the pay equity plan being posted. Upon receipt of the notice of objection, a hearing shall be set by the hearings tribunal. The tribunal has a range of powers, including the power to order a review officer to prepare a pay equity plan which the tribunal will then compel the employer to implement.

The employer must advise the commission if has failed to develop a pay equity plan. In such cases, or where a Notice of Objection is received, a review officer shall be assigned by the tribunal. The review officer is empowered to review the circumstances underlying the objection or failure to file a plan, and is mandated to attempt to effect a settlement between the parties. If such settlement is not possible, the review officer shall issue an Order resolving the outstanding disputes between the parties. Where such order is issued, it must be posted in the workplace forthwith. Where the complaint that triggered the hearing relates to the dismissal of an employee based on a complaint under the Act, the tribunal can order that the employee be reinstated and that the employee’s compensation be restored to what it was. The tribunal can also order that the employer pay all back pay owing from the date of dismissal.

As can be seen, the Tribunal extensive powers to impose compensation practices on an employer. There have been numerous decisions issued by the tribunal dealing with the criteria which must be examined in assessing pay equity, and the methods by which an employer will be ordered to implement such requirements.

There have over the years been a number of cases where an employee who has settled a wrongful dismissal action has subsequently filed a complaint under the Pay Equity Act on the basis of discrimination in compensation. For that reason, employment lawyers acting for employers have routinely included a provision in any Release signed in a wrongful dismissal action that the employee releases all rights to file a claim under the Pay Equity Act.

In a recent decision of the Ontario Superior Court, the Court reviewed a decision by the Pay Equity Tribunal refusing the employer’s motion to dismiss the employee’s claim under the Act. The motion was based on the terms of the Release executed by the employee in exchange for a severance package given to her on termination of her employment.. Under the terms of the Release, the employee agreed that she would have no further claims of any nature against her employer. Following execution of the Release and receipt of the settlement funds, the employee initiated a complaint with the Pay Equity Commission. The employer brought a motion to the Tribunal to dismiss the complaint based on the terms of the release.

In rejecting the employer’s motion, the tribunal held that the Release did not encompass the employee’s complaint on two different grounds:

• That the employer had not complied with the Act prior to the signing of the Release and;
• That the Release made no specific reference to the right or rights which were being surrendered by the execution of the Release.

The tribunal therefore held that the employee had not, in fact, contracted out of her rights under the Act. It therefore dismissed the employer’s motion.

The employer appealed the decision to the Divisional Court. In granting the appeal, the Court stated in a unanimous decision that the tribunal had incorrectly applied the law. The Court held that, absent evidence of coercion or duress, parties should be held to the bargain that they made. As the employee had agreed to sign the Release freely and in exchange for a payment in her wrongful dismissal action, the terms of the Release should be enforced.

This decision gives comfort to employers who are, in fact, obtaining comprehensive Releases from employees in all circumstances where employment is terminated. Such Releases should be drafted by counsel, to ensure the employer is obtaining the relief which it anticipates in exchange for its payment.

About the author: Earl Altman is a partner with the Toronto law firm of Garfinkle Biderman LLP. He can be reached at (416)869-1234 Ext. 280 or ealtman@garfinkle.com

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