By Ruth Trask  and Josh Merrigan

Pay equity is an increasing focus for governments and advocates in the employment world, which means that employers must also pay attention. The Government of Newfoundland and Labrador has announced that they are introducing pay equity and pay transparency legislation which carries implications for hiring and compensation of workers. Employers who do not comply are subject to penalties.

The Pay Equity and Pay Transparency Act will start to come into force on April 1, 2023 with pay equity requirements for core government. The Government has not yet announced when the law will come into force for other public bodies. The Act also creates pay transparency requirements which, sometime in the future, will be imposed on all employers in the province.

Who will be affected by the pay equity requirements?

• Core government. Starting in April 2023, the pay equity provisions will apply only to the executive and legislative branch of the provincial government.
• Public Bodies of moderate size. In the future, at a date which will be announced, the pay equity provisions will apply to “public bodies” including crown corporations, commissions, boards, courts, municipalities, regional health authorities, Memorial University of Newfoundland, College of the North Atlantic, school boards, and the Royal Newfoundland Constabulary. The pay equity provisions will not apply to public bodies that have fewer than 10 employees.

What will be required of employers under the pay equity regime?

Under the pay equity provisions, all public sector employers will be required to establish and maintain pay equity, which is defined as:

a compensation practice that is based on the relative value of the work performed, irrespective of the gender of employees and includes the requirement that the employer not establish or maintain a difference between the pay paid to employees based on gender who are performing work of equal or comparable value;

Public sector employers will also be required to prepare reports relating to pay equity and their actions taken, and submit them to the Pay Equity Officer, a new position established under the Act with responsibility for ensuring compliance.

The Act does not prevent differences in pay where the employer can show a difference in pay is the result of:

• a formal seniority system that does not discriminate on the basis of gender;
• a merit system that does not discriminate on the basis of gender;
• a temporary employee training or development assignment that is available to all employees and leads to career advancement;
• “red-circling” (where the value of a position has been downgraded and the pay of the incumbent employee has been frozen or the employee’s increases in pay have been curtailed until the pay for the downgraded position is equivalent to or greater than the pay payable to the incumbent);
• or a skills shortage that is causing a temporary inflation in pay.

Finally, the pay equity provisions provide that an employer cannot establish or maintain pay equity by reducing, freezing, or red-circling the pay of an employee; or by placing an employee in a lower step of a pay range that has been adjusted upward.

What about pay transparency?

The Act also creates pay transparency requirements. When these sections come into force, they will apply to all employers in the province, not only those in the public sector. We don’t yet know when these will be made effective. There are two main implications:

• employers will not be permitted to seek pay history information from an individual applying for employment; and
• employers who publicly advertise a job posting will be required to include the expected pay or range of pay for the position.

Key Takeaways

• This legislation will require affected public-sector employers to review, analyze, and evaluate their hiring and compensation practices, and to implement changes where they are needed, before the Act comes into force.
• Employers may need to create systems to gather and track the information that will be needed to report to the Pay Equity Officer.
• Affected employers may need to adjust pay levels to remove gender-based differences, or be prepared to establish that a pay difference is justifiable based on the permitted grounds.
• Employers need to look out for the future proclamation date for the new pay transparency requirements, so they can adjust hiring practices accordingly.

This client update is provided for general information only and does not constitute legal advice. If you have any questions about the above, please contact a member of our Labour and Employment group.

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