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Multiple pay equity plans: First decision released granting – and denying – an employer request

February 21, 2023
By Jackie VanDerMeulen, Sophie Arseneault and Rebecca Rossi/Fasken

A CN Rail engineer oversees a diesel locomotive reversing into a asphalt/sealant processing facility in Bedford, N.S. Photo: Getty Images

The Interim Federal Pay Equity Commissioner  has released her much anticipated first decision under the new Pay Equity Act in Canadian National Railway Company and Unifor, IBEW and Teamsters Canada Rail Conference, partially granting an employer’s application for multiple pay equity plans.

The Commissioner was tasked with evaluating the Canadian National Railway’s (CN) application for authorization to establish distinct pay equity plans for the following groups:

  1. Trainmen, Conductors and Engineers represented by the Teamsters Canada Rail Conference (“TCRC T&E”);
  2. All other unionized employees;
  3. Employees in its Investment Division; and
  4. All other non-unionized employees.

The Commissioner granted CN’s application to establish a separate pay equity plan for the employees in the Investment Division. It denied CN’s request to split the TCRC T&E and other unionized employee groups from the other non-unionized employees.

This decision provides critical insight into the analysis that will be applied by the Commissioner in assessing applications for multiple plans, including the potential rationales and evidence required to support applications.

Employer obligations under the Pay Equity Act

As described in our earlier bulletins (Getting Ready for the New Federal Pay Equity Act and The Federal Pay Equity Act Is in Force: What Now?), the new Pay Equity Act provides federally-regulated employers with three years (which, for most employers gives them until September 3, 2024) to develop a pay equity plan that identifies and, if applicable, corrects gender-based wage gaps for employees in predominantly female job classes. For employers with 100+ employees or unionized employees, this pay equity plan must be developed by a joint employer-employee committee that includes at least one representative for each bargaining agent (if applicable) and at least one representative for non-unionized employees.

Applying for multiple plans Under the Pay Equity Act

The standard under the Pay Equity Act is that each employer will establish a single pay equity plan in respect of its employees. However, the Act establishes a process by which employers can apply to the Commissioner for authorization to establish multiple pay equity plans (and therefore multiple pay equity committees, if the employer is required to establish a pay equity committee).

The Commissioner must deny an application for multiple pay equity plans if she is of the opinion that, if more than one pay equity plan were to be established, it would not be possible for the employer to identify enough predominantly male job classes for a comparison of compensation to be made for each pay equity plan. If the application clears this threshold issue, the Commissioner can authorize the establishment of more than one pay equity plan if she is of the opinion that it is appropriate in the circumstances, having regard to the purpose of the Pay Equity Act.

Key insights from the CN decision

The threshold Issue: Enough male comparators

The CN Decision provides important guidance regarding the interpretation of both branches of the legal test to be applied. On the threshold issue, the Commissioner interpreted the legislation and concluded that the question to be answered is:

“Whether multiple plans would make it impossible to fully satisfy the comparison of compensation between predominantly male and predominantly female job classes because of an insufficient number of predominantly male job classes in each of the proposed plans.”

On the evidence before her, which included that more than 90 percent of CN’s employees were male and that of the four plans proposed by CN, the majority of employees in each would likely be male, the Commissioner applied this test and concluded that there were “enough” predominantly male job classes across all of the proposed pay equity plans.

Appropriate in the circumstances: Exercising discretion

The Commissioner also provided guidance on the second stage of the analysis, including factors which may be relevant in determining whether more than one pay equity plan is “appropriate in the circumstances.” The Commissioner confirmed that the circumstances in which the establishment of multiple plans might be appropriate are not fixed and that every application will be analyzed based on the unique circumstances of each case. In doing so, the Commissioner provided the following insights:

  • factors suggestive of the diverse needs of employers, such as regional disparities, complex bargaining structures or communities of interest, will be considered but are not determinative;
  • the impact that multiple plans might have on reinforcing occupational gendered segregation will be an important consideration; and
  • it is crucial to consider whether the proposed plans best serve the objective of proactively redressing systemic pay-based gender discrimination in the workplace.

Denial of request to split its supply chain operations

CN’s request for authorization to establish separate pay equity plans for the TCRC T&E employees, other unionized employees and non-unionized employees, respectively, was based on two key grounds: the divergent communities of interest for these employee groups and the efficiencies achieved by placing these different groups in different plans.

In denying this request, the Commissioner’s relied primarily on evidence which demonstrated that the vast majority of women in CN’s workforce occupy job classes that have historically performed what is seen as “women’s work”, such as human resource, administrative and corporate service roles, and tend to be non-unionized. The Commissioner found that separating predominantly female job classes into a single plan with no unionized male comparators would reinforce the occupational segregation that had been created by fragmented bargaining structures. This, she determined, would frustrate the purpose of the Pay Equity Act and therefore was not an appropriate case in which to exercise her discretion to grant CN’s request to grant separate plans for the TCRC T&E, other unionized and non-unionized employee groups, respectively. The Commissioner was not persuaded that the challenges of conducting the pay equity exercise for the entire group of employees in CN’s supply chain operations in a single plan were sufficient to override the concern of occupational segregation.

Approval to carve out the Investment Division

The Commissioner’s decision to grant CN’s request for authorization to establish a separate pay equity plan for its Investment Division was based primarily on her conclusion that the Investment Division was sufficiently distinct from CN’s core business of “supply chain operations.” In particular, the Commissioner relied on the following key factors:

  • Distinct mandate: the Investment Division is responsible for managing CN’s defined benefit pension fund and does not participate in CN’s core supply chain operations;
  • Independent management: the Investment Division has its own Chief Executive officer who independently manages and operates the Division and who reports directly to CN’s Board of Directors.
  • Separate human resources: the Investment Division has its own human resources support and unique compensation structures; it does not rely on the financial performance of CN’s supply chain operations to assess the incentives for its workforce or to measure its own financial performance.

The Commissioner also held that the request to establish a separate pay equity plan for the Investment Division does not raise the risk of reinforcing occupational gender segregation in that the request treats the operation as a whole in that all job classes are contained in the same plan, allowing for the type of evaluation and comparison contemplated by the Pay Equity Act.

Takeaways for employers

In the CN Decision, the Commissioner is keen to remind employers that each application for multiple plans will be analyzed based on the unique circumstances of each case. However, the CN Decision also sends a clear message to employers that applications for multiple plans must be grounded not only in business realities and labour relations considerations, but also more fundamentally in pay equity theory. Employers who are planning to make an application for multiple pay equity plans must therefore be prepared to demonstrate – with concrete evidence – that in light of the purpose of the Pay Equity Act and pay equity theory more broadly, it is appropriate for the Commissioner to authorize multiple plans.

Jackie VanDerMeulen is a partner at Fasken. She can be reached at jvandermeulen@fasken.com. Sophie Arseneault is a partner at Fasken. She can be reached at sarseneault@fasken.com. Rebecca Rossi is an associate at Fasken. She can be reached at rrossi@fasken.com. For more information, visit https://www.fasken.com/

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