THE EMPLOYERS' EDGE
Recent Divisional Court Ruling has Significant Implications for Public Sector Employers Using Proxy Method for Pay Equity Compliance
With smaller broader public sector employers like daycares and women’s shelters already facing declining government funding, a recent Court decision overturning the Pay Equity Tribunal’s long standing practice of not requiring employers using the proxy method of comparison to go back to the original Proxy employer for updated male comparator information to maintain pay equity could mean further significant costs to these organizations already struggling to meet the demands of those they service in our communities.
Since 1993, employers in the broader public sector (as defined in the Pay Equity Act “PEA” and Regulations) who did not have sufficient male comparators in their organization to conduct a pay equity analysis were required to use the “Proxy” method of comparison. These “Seeking” employers were generally smaller, female dominated workforces. Using male comparator data provided by a “Proxy Employer” (generally larger public sector employer where job rates are considerably higher), the Seeking employer would do pay equity comparisons using the male proxy information to determine if there were pay equity gaps. In many cases, because of the disparate wage rates between the Seeking and Proxy employers, there were significant pay equity gaps that these smaller broader public sector employers would try to close using a formula of 1% of their annual payroll. For many years, the provincial government funded the 1% pay equity adjustment requirements.
The PEA is silent as to the ongoing maintenance obligations these Seeking employers had vis-a-vis the original Proxy comparator. For many years, the Commission’s position has been that Seeking employers did not have to go back to the Proxy employer for updated data to maintain pay equity but rather were required to apply any internal non-pay equity wage adjustments to the original proxy rates and keep applying the 1% of annual salary to try to close the gap.
The Ontario Nursing Association (ONA) sought judicial review and constitutionally challenged a 2016 decision of the Pay Equity Tribunal that adopted this maintenance practice/interpretation of the PEA in the context of a group of participating nursing homes. On April 30, 2019 the Court determined that the Tribunal’s interpretation of the PEA violated the Canadian Charter of Rights and Freedoms and the PEA should be interpreted to require ongoing reference to the male comparators from the original Proxy employer. The Tribunal was ordered by the Court to “specify what procedures should be used to ensure that the claimants who achieved pay equity through the proxy methodology continue to have access to a male comparator in order to determine whether pay equity has been maintained.”
What this decision means for those Seeking employers who achieved pay equity using the Commission’s established maintenance process and those who still have pay equity wage gaps remains to be seen as it is anticipated that the participating nursing homes will seek leave to appeal the decision of the Divisional Court. In the interim, broader public sector employers will need to dust off their pay equity plans to evaluate their current pay equity status, make sure their record keeping of their pay equity efforts are in order and carefully consider their position in any collective bargaining negotiations until this issue is played out in the courts.
CCP will keep you posted on any new developments with this case. For a list of CCP team members with expertise in pay equity, please click HERE.