Summary
The Ontario Pay Equity Hearings Tribunal (the “Tribunal”) recently issued a significant decision in Glen Hill Terrace Christian Homes Inc v Canadian Union of Public Employees (CUPE) Locals 2225-06/12 and 5110, 2016 CanLII 27172 (ON PEHT) (“Glen Hill”), clarifying how employers must maintain pay equity when their original pay equity plan was established using the proxy method—a common situation in the long‑term care and broader public sector.
Specifically, the Tribunal held that employers who used the proxy method to achieve pay equity must continue using proxy to maintain pay equity, unless the pay equity plan is formally amended under the Pay Equity Act (the “Act”). In other words, unionized employers cannot unilaterally switch to using alternative methods of comparison – including if they now have male job classes internal to their organization – without first negotiating an amendment due to a changed circumstance with the union.
Background: Pay Equity and the Proxy Method of Comparison
Public and private sector employers in Ontario have obligations under the Act to achieve and maintain pay equity in the workplace. See our previous insight for more information on pay equity obligations for Ontario employers.
The proxy method of comparison, only available to public sector employers, permits an employer without any male job classes (referred to as a “seeking employer”) to compare its female job classes to female job classes employed by a prescribed employer, which does have male job classes and has conducted its own pay equity review (referred to as the “proxy employer”). From this comparison, the seeking employer can determine and implement any pay equity adjustments for its own female job classes.
Once pay equity is achieved, employers have an obligation to maintain pay equity by ensuring that gender-based differences in compensation do not emerge or widen. The Act does not specify how pay equity is to be maintained by employers who used the proxy method of comparison. In 2021, the Ontario Court of Appeal overturned the Tribunal’s decision that the proxy method was not to be used in maintenance, and ordered the Tribunal to determine “what procedures should be used to ensure that those employees, represented by Unions, who have established pay equity through the proxy method, will continue to have access to male comparators to maintain pay equity.” Glen Hill answers this question.
The Facts and Arguments in Glen Hill
Glen Hill had been deemed to have achieved pay equity pursuant to the proxy method, and was contacted by the Pay Equity Commission (“Commission”) as part of its monitoring process. The Commission ordered Glen Hill to maintain pay equity using the proxy method of comparison for each year since 2005. Glen Hill filed an application to the Tribunal requesting that the orders be overturned, in part because the order to maintain pay equity using proxy was not founded in the Act.
Glen Hill argued that, because maintenance by proxy was not specified in the Act, it did not have any further obligations. Alternatively, the Act provided for a hierarchy of comparison methods, such that the proxy method need not be used once there are male comparators in the workplace which can be directly compared using job-to-job or proportional value. In the further alternative, Glen Hill also raised concerns that using proxy for maintenance does not reflect employers’ decisions to pay employees differently from other employers for “non-discriminatory” reasons, such as compensation practices, funding, and organizational size. If maintenance by proxy was required, the Tribunal ought to develop procedures to account for these factors.
The Canadian Union of Public Employees, who represented employees at Glen Hill, sought maintenance by proxy consistent with achievement by proxy, as outlined in the Act, on the basis that Glen Hill did not identify that it actually had any internal male comparators.
A number of intervenors also provided arguments, including:
- Section 14.1 of the Act provides a mechanism to negotiate amendments if a pay equity plan is no longer appropriate;
- the “ability to pay” as alleged by Glen Hill should not be considered, due to systemic underfunding of female-dominated jobs;
- retroactive adjustments should be limited to 2021 because the law was consistent until this date;
- multiple comparators should be used in order to avoid conducting a “market review” of wages of female job classes.
The Tribunal’s Decision
In brief, the Tribunal held that employers who used the proxy method of comparison to achieve pay equity must continue using the proxy method of comparison to maintain pay equity, unless and until there has been a change in circumstance which would render the pay equity plan no longer appropriate, pursuant to section 14.1 of the Act, in which case, amendments to the plan must be negotiated with the union. Failing agreement, an application can be made to Review Services.
Pay Equity Maintenance by Proxy
The Tribunal first acknowledged the Court of Appeal’s decision that maintenance ought to proceed by proxy. The Tribunal determined that the language of the Act required continued comparison between female job classes using the proxy employer, rather than male job classes, as the Commission was only able to enforce the provision of information from the proxy employer relating to female job classes under the Act.
Further, once a deemed approved plan takes effect, it is that plan which continues and must be maintained. The Tribunal acknowledged that, if an employer later has a male job class that would be an appropriate comparator, this would constitute a changed circumstance rendering the pay equity plan no longer appropriate, and thereby triggering the obligation to negotiate amendments to the plan with the union under section 14.1.
The Tribunal determined that the method for determining the proxy employer is contained in O. Reg. 396/93: Proxy Method of Comparison (the “Regulation”) (i.e., based on the description of the seeking and proxy employers), and the Tribunal had no jurisdiction to identify selection of a proxy employer using different factors.
The Tribunal ordered that Glen Hill and CUPE engage in the proxy maintenance process by identifying the proxy employer, requesting necessary information be exchanged, evaluating the female job classes, comparing them to the information provided by the proxy employer, and identifying if any gaps have re-emerged since pay equity was deemed to be achieved on March 1, 2011. The Tribunal also ordered Glen Hill to identify if it was relying on any “non-discriminatory factors”.
Non-Discriminatory Differentials
The Tribunal also addressed Glen Hill’s argument regarding pay disparity across organizations, and found that the Act contemplated this as well. The Tribunal noted that female job classes would likely be exactly the same across organizations, and scored the same or similarly, which would typically result in pay parity. However, the Act permits differentials in job rates after pay equity has been achieved pursuant to section 8, where the differentials are due to:
- a formal seniority system that does not discriminate on the basis of gender;
- a temporary employee training or development assignment that is equally available to male and female employees and that leads to career advancement for those involved in the program;
- a merit compensation plan that is based on formal performance ratings and that has been brought to the attention of the employees and that does not discriminate on the basis of gender;
- red-circling;
- a skills shortage that is causing a temporary inflation in compensation because the employer is encountering difficulties in recruiting employees with the requisite skills for positions in the job class; or
- differences in bargaining strength (notably, this exemption is only available to employers after pay equity has been achieved).
The Tribunal determined that Glen Hill’s concerns regarding “organization size, the ability to contract out, low or uneven levels of government funding, overseas competition, low profit margins, the degree and extent of unionization, sorting, complexity of work, and revenue generation” are all factors which can be considered under the “bargaining strength” exemption which is now available to employers conducting a maintenance review, rather than as a justification for a different method of maintenance. The Tribunal specifically noted that “ability to pay” may be a factor relied upon in arguing that differences of compensation from the proxy employer are a result of bargaining strength, and that this was different that relying upon ability to pay as the basis for refusing to make adjustments (which the Tribunal has repeatedly rejected). However, as this evidence was not before the Tribunal in this case, the Tribunal noted that this is for a later case to interpret.
Takeaways
Public sector employers who used the proxy method of comparison to achieve pay equity now have guidance from the Tribunal as to how to conduct pay equity maintenance.
If the seeking employer now has male job classes, the employer (or the union) should identify that there has been a change in circumstances to render the pay equity plan no longer appropriate, and commence negotiations to amend the plan. This can include negotiating to use an alternative method of comparison.
However, if there are still no male job classes, the seeking employer should follow the process identified for proxy pay equity achievement when seeking to maintain pay equity:
- Determine the appropriate proxy employer under the Regulation;
- Request information regarding the proxy employer’s female job classes;
- Evaluate internal female job classes;
- Compare internal female job classes to the proxy employer’s female job classes;
- Determine whether any pay equity adjustments are owing; and
- Implement those pay equity adjustments.
It remains to be seen whether Glen Hill will be appealed. Even if it is not, there are still many practical questions, such as the application of the bargaining strength exemption and arguments limiting retroactive liability, that remain to be determined on the facts of particular cases.
Our pay equity team can assist on all aspects of pay equity, including inquiries relating to pay equity maintenance and litigating pay equity disputes.
Need More Information?
For more information or assistance with pay equity, contact Alyssa Johnson at ajohnson@filionlaw.com, one of our pay equity team leads, Carol Nielsen at cnielsen@filionlaw.com and Melanie McNaught at mmcnaught@filionlaw.com, or your regular lawyer at the firm.