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Acme Corporation (“Acme”) has eleven employees. Its only full- time employee, Benny, is paid $4 per hour higher than the other
ten employees, who work part-time. A part-time employee, Sandy, tells Acme: “I think that my pay rate is lower than Benny’s rate”, and asks Acme to look into the matter and (if necessary) increase her pay to equal Benny’s. Perhaps you are puzzled by this request. But after April 1, 2018, this request will not be uncommon.
On November 27, 2017, the Fair Workplaces, Better Jobs Act, 2017 (the “Act"), amending the Employment Standards Act, 2000 (the “ESA”), received Royal Assent (became a binding law in Ontario). Different provisions of the Act are scheduled to enter into force on different dates. For instance, the new ESA “misclassification” provision (see our BEST Winter 2017 article “Independent Contractor or Employee”) entered into force immediately on November 27, 2017. The new ESA equal pay for equal work (“EPEW”) provision entered into force on April 1, 2018. The EPEW provisions target, and aim to prohibit, differences in pay rates based on employment status.
There is no definition of “status” or “employment status” in the ESA. However, starting April 1, 2018, there is a “difference in employment status” definition, which is: a difference in the number of hours regularly worked by the employee or a difference in the term (i.e. period) of employment – full-time, part-time, permanent, temporary, seasonal or casual status employees.
What Does It Mean for Acme Corporation?
Benny works 35 hours per week, and Sandy
works 18 hours per week. There is no other relevant difference in their work, so based on this difference, Acme pays Benny $21 per hour and Sandy $17 per hour. In these circumstances, starting on April 1, 2018, Acme has failed to comply with the EPEW provision of the ESA. Hence, Acme faces potential administrative sanctions, fines, claims, legal expenses, and damage to its reputation.
After April 1, 2018, employers must pay the same pay rate to casual, permanent, part-time, full-time, temporary, and seasonal employees, for performing substantially the same work in the same establishment, with substantially the same skill, effort and responsibilities and under similar working conditions (“Similar Work”). Any employee can ask an employer for a pay rate review, if the employee believes that he or she is not paid the same rate as others performing Similar Work.
Importantly, the EPEW provisions prohibit “difference in assignment employee status” (italics added), which covers employees assigned by a temporary help employment agency to the ultimate employer client.
Acme might be able to justify different pay rates to employees performing Similar Work with different employment status or assignment employee status if Acme has put in place a good faith seniority or merit system, or a system that measures earnings by quantity/quality of production (the “Exception”). Needless to say, such “good faith” distinctions can be subjected to challenge if it seems that under the system, for example, men are always paid more than women or long-term employees are generally but not always paid more than shorter-term
employees. A good faith system is one that is applied consistently rather than permit arbitrary decision making.
What To do ... And Not to do?
Employers and employment agencies should become familiar with their obligations under the new EPEW provisions. If you have employees with different employment status or period of employment, who are paid different rates/wages, seek legal advice. Do not underestimate the pitfalls that the new EPEW provisions have given rise to. For example, Acme cannot resolve the situation above by lowering Benny’s pay to match Sandy’s. Not only would that step lead to a potential lawsuit from Benny for constructive dismissal, but also, that step is expressly prohibited by the EPEW provision.
Employers should develop an EPEW holistic system, instead of reacting to EPEW issues. If you have a pay rate policy in place, update it and perform a wage review of your payroll practices and policies to address potential EPEW liability. If you do not have a pay rate policy in place, contact your employment lawyer or another professional advisor with experience in the field, to develop one.
Under the EPEW provisions, employment agencies and their ultimately client employer(s) are jointly and severally liable for unpaid “wages”, and this includes amounts that were not paid in breach of the EPEW provisions. Hence, employment agencies who place employees should match the pay rates that their relevant client employer pays to other employees performing Similar Work.
34 THE BEST MAGAZINE FALL 2018
ECONOMÍA Y FINANZAS
Equal Pay For Equal Work
BY GUILLERMO SCHIBLE
ECONOMY AND FINANCE
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