Part XII - Equal pay for equal work

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Although the equal pay legislation was initially written to redress the problem of lower wages paid to females, Part XII of the Employment Standards Act, 2000 ensures that employees (both male and female) in Ontario are not paid a lower wage than their co-workers simply because of their sex.

Equal pay for equal work vs. pay equity

The Pay Equity Act, RSO 1990, c P.7,was enacted in 1987 and came into force on January 1, 1988. It imposes a requirement commonly referred to in this country as "equal pay for work of equal value", which is also known as "comparable worth" in the United States and "equal pay for equal value" in Europe.

The purpose of the Pay Equity Act is to remove systemic gender discrimination from employers' compensation practices.

Pay equity is different from the s. 42 equal pay provision under the ESA 2000 in that the pay equity legislation compares wage rates of female job classes to male job classes to ensure that women performing jobs that are different from but of equal value to jobs performed by men will receive equal pay. (Note: subsequent amendments to the Pay Equity Act also imposed a "proportional value" requirement where the jobs are not equal.) Section 42 of the ESA 2000, on the other hand, requires that women performing substantially the same job as men, and vice versa, receive equal pay.

The Pay Equity Act is intended to eliminate the wage gap that exists due to the undervaluation of what is typically thought of as "women’s work". Therefore, the equal pay provision in the ESA 2000 continues to be a remedy where a wage gap exists between men and women performing substantially the same jobs.

The Pay Equity Act is administered by the Pay Equity Commission, under the direction of a Pay Equity Commissioner who reports to the Minister of Labour. Inquiries concerning pay equity should be directed to the Pay Equity Commission.

Section 41.2 - Interpretation

Section 41.2 clarifies that for the purposes of the equal pay for equal work provisions in ESA Part XII, “substantially the same” means substantially the same but not necessarily identical. This provision informs the interpretation of the ESA Part XII, s. 42(1), s. 42.1(1) and s. 42.2(1).

Section 42 - Equal pay for equal work

Equal pay for equal work - s. 42(1)

This section prohibits an employer from paying an employee a lower rate of pay than another employee on the basis of sex, where the employees perform “equal work”, as established in clauses (a) through (c). This requirement is subject to certain exceptions that are set out in s. 42(2) of the Employment Standards Act, 2000.

Employees of different sexes

Section 42 addresses a difference in the rate of pay between a male and a female, and vice versa. Two males, or alternately, two females, could be paid different rates of pay for performing “equal work” with no violation of this section occurring. Accordingly, the comparison must be between a male and female. Either a male or a female may be the lower paid employee, requiring the situation to be redressed.

Rate of pay

For this provision to apply, there must be a difference in the rate of pay between a female and a male employee who perform “equal work”.

“Rate of pay” is not defined in the legislation.

It is Program policy that, for the purposes of Part XII, rate of pay generally includes:

Hourly rates
Salaries
Piece work rates
Commission rates
Overtime pay rates

It is Program policy that, for the purposes of Part XII, rate of pay generally does not include:

Vacation pay rates
Tips or other gratuities, including tip pool percentages
Expenses and travel allowances
Benefit plans (or a payment in lieu of benefits)

There may be other forms of remuneration that could be captured under “rate of pay” that are not addressed in the list above. For example, there may be situations where certain bonus structures would properly fall under “rate of pay”, whereas other bonus structures would not. In assessing whether particular remuneration contributes to an employee’s “rate of pay”, an employment standards officer will consider all relevant factors, including the specifics of the compensation system, its purpose, and the legislative intent behind Part XII.

When determining whether there is a difference in the rate of pay between employees earning commissions, or employees who are subject to piece work rates, an employment standards officer will compare the rates applicable to both employees. For example, if a female and male employee both earn minimum wage plus 15% commission on all sales, the employees will be considered to be paid the same rate of pay even if one of the employees takes home a greater dollar amount because he or she made more sales. A similar approach will be taken with respect to overtime. As long as two employees are subject to the same overtime rate and overtime threshold, there would not be a difference in the rate of overtime pay between the two employees. One employee may earn more overtime pay than another because they work more hours, but this would not mean that there is a difference in the overtime rate between the employees.

One question that might arise is how to conduct a comparison in rate of pay between two employees who do “equal work” but who are paid pursuant to different compensation schemes. Comparing a set hourly rate or yearly salary to earnings that may fluctuate based on employee performance, such as commission or piece work, is not a viable assessment. It is Program policy that, generally, comparisons can only be made between two employees with the same remuneration scheme - in other words, only by comparing “apples to apples”. For example, if a female employee earns $24 an hour, an employment standards officer will not compare her rate of pay with a male employee who earns $18 an hour plus a commission rate. One exception, however, is the comparison between employees earning an hourly, weekly, or monthly rate, or a yearly salary; the comparison becomes “apples to apples” once it is established what each employee earns as an hourly rate and thus a direct comparison is possible. Similarly, an “apples to apples” comparison is possible where two employees, for example, both earn $25 per hour but one of the two also earns a 10% commission on sales. In this case, though there are different remuneration schemes, a direct comparison is possible because the employees earn exactly the same rate in one element of the remuneration scheme. In this example, the obvious outcome is that the rates of pay are not the same.

“Equal work”

For this provision to apply, the female and male employees who are being compared must perform “equal work”. The elements that make up “equal work” are established in clauses 42(1)(a) through (c). In order for work to be considered equal, all of the following must be present:

The employees perform substantially the same kind of work;
The work is performed in the same establishment;
The work being performed requires substantially the same skill, effort and responsibility; and
The work is performed under similar working conditions.

Each of these elements is examined individually in the analysis below.

1. Substantially the same kind of work

Until January 1, 1975, the equal pay section of the Act set out that the male and female employees were to be paid the same wage "… for the same kind of work… the performance of which requires equal skill, effort and responsibility. . ."

In Regina v Howard et al., Ex parte Municipality of Metropolitan Toronto, 1970 CanLII 395 (ON CA), the Ontario Court of Appeal overturned a lower court decision and stated that "to construe ‘the same work’ as meaning ‘the identical work’ is to render completely redundant the words following ‘the performance of which requires equal skill, effort and responsibility.’" This decision led to legislative amendment of this section of the Act to its current wording in s. 42(1)(a) i.e. to reflect the court’s ruling, which was consistent with the policy intent of the provision.

Further to that, the Fair Workplaces Better Jobs Act, 2017 introduced a definition to Part XII of the ESA 2000 that took effect on April 1, 2018. Section 41.2 defines “substantially the same” to mean substantially the same but not necessarily identical.

"Substantially the same kind of work" refers to the main characteristics or the core duties of the work. Jobs do not have to be identical for this standard to apply. Minor differences in job content do not, in and of themselves, make the section inapplicable.

When considering whether the kind of work is “substantially the same”, the work to be compared is work that the employees are performing contemporaneously. The comparison is to be made on the basis of the actual work the employees perform, not the terms of hiring, or the job descriptions.

An officer must look at the jobs as a whole and consider all information that is relevant in the particular circumstances. There are a number of different possible scenarios where a finding of substantially the same kind of work may be made.

For example, where two employees perform identical tasks 90% of the time and different tasks only 10% of the time, an officer may conclude that the employees perform substantially the same kind of work – i.e. the time spent on different tasks is not so extensive as to support a finding that the overall kind of work being performed is not substantially the same.

Similarly, a finding that substantially the same kind of work is being performed may be made where 90% of the employees' time is spent performing tasks that, although not identical, are so alike as to warrant that finding even though 10% of their time is spent on tasks that are different. Note that in the context of these provisions, it is the work itself that is being compared, not the value of the work (as is the case in the pay equity context).

The examples above are provided as illustrations of possible scenarios where a finding of substantially the same kind of work may be made. They are not intended to be an exhaustive list of such scenarios or to suggest that, as a threshold, 90% of the employees’ time must be spent on work that is identical or so alike before a finding that substantially the same kind of work is being performed can be made. Rather, the examples are provided as a point of reference only and are meant to assist in achieving general consistency in the interpretation of this provision. The examples do not establish a “rule” or a “test” and they should not be applied in a formulaic way without consideration of all relevant information. There may be situations where a higher or lower percentage of time may be spent on tasks that are identical or so alike, such that a finding that substantially the same kind of work is being performed is appropriate.

2. In the same establishment

The term "establishment" is defined in s. 1 of the ESA 2000 as follows:

"Establishment" means a location where the employer carries on business. However, two or more locations of the employer will be considered a single establishment if:

They are in the same municipality; or
There are common bumping rights for at least one employee across municipal boundaries.

See ESA Part I, s. 1 of the Manual for further information regarding the definition of establishment.

3. Performance requires substantially the same skill, effort and responsibility

Per s. 42(1)(b), the performance of the work must require substantially the same skill, effort and responsibility. These are three separate requirements, each of which must be met in order for s. 42 to apply.

The Fair Workplaces Better Jobs Act, 2017 introduced a definition in Part XII of the ESA 2000 that took effect on April 1, 2018. Section 41.2 defines “substantially the same” to mean substantially the same but not necessarily identical.

This further clarified that the skill, effort and responsibilities do not need to be exactly the same or identical to be considered substantially the same. Minor or inconsequential differences do not render the standard inapplicable.

The requirement for skill, effort and responsibility are applied to the actual work that the employees perform, and not their terms of hiring, job description or job title. The work that is to be compared is work that the employees are performing contemporaneously. The jobs must be evaluated as a whole. The fact that there are some differences in tasks between two jobs would not be a sufficient reason, in and of itself, to establish that the jobs do not require the same skill, effort or responsibility.

(i) Performance requires substantially the same skill

Skill refers to the degree or amount of knowledge or physical or motor capability needed by the employee performing the job. It includes factors such as education, manual dexterity, experience and training, and is measured in terms of performance requirements

(ii) Performance requires substantially the same effort

Effort is the physical or mental exertion needed to perform a job. An example of physical effort is the amount of strength a labourer needs to lift packed boxes. An example of mental effort is the amount of thinking and concentration required by a bookkeeper to balance the books.

When determining whether the performance of the work requires substantially the same effort, the evaluation is based on the effort required for the work itself, and not on the effort expended by a particular individual. For example, where two employees lift 50 pound boxes, it is irrelevant that one employee finds the task to be very physically demanding while the other employee finds the same task to be quite effortless. However, it would take substantially more effort for an employee to lift 80 pound boxes as compared to an employee who lifts boxes that weigh only 10 pounds. As a result, where two jobs have different weight lifting requirements (e.g. 80 pounds versus 10 pounds), they may not satisfy the requirement that the work require substantially the same amount of effort.

The sporadic performance of an activity that may require extra physical or mental effort does not suffice to establish that the jobs require substantially different levels of effort.

(iii) Performance requires substantially the same responsibility

Responsibility is measured by the number and nature of an employee’s job obligations, the degree of accountability and the degree of authority exercised by an employee in the performance of the job. Some factors to consider include:

Responsibility for the safety of others;
Supervision of others;
Handling of cash;
Safeguarding of confidential or restricted information; and
Supervision received by the employee.

For example, an employee who always performs assigned tasks and duties in accordance with specific, detailed instructions would not have substantially the same degree of responsibility as an employee who works only from general policy objectives and refers to superiors on an infrequent basis only, when interpretations of organizational policy are in question.

As another example, where one employee is responsible for collecting and providing the money from individual cash registers to the accounting department, that employee would likely have more responsibility than an employee who does not handle any cash, or who handles cash only rarely in the performance of his or her job.

4. Similar working conditions

The working conditions between the two jobs being compared must be “similar”. (Note this is a lower threshold than “substantially the same,” as defined in s. 41.2 and applied in the “substantially the same kind of work” and “substantially the same skill, effort and responsibility” parts of the test).

"Working conditions" generally refer to factors such as:

the working environment, such as an office or warehouse
exposure to the elements, such as work that must be performed in severe weather conditions
health and safety hazards, such as working at heights or exposure to chemicals

For example, appliance repairers who spend all their time on the employer’s premises do not have similar working conditions to appliance repairers who do their work attending at customers’ homes.

Exception - s. 42(2)

The prohibition against paying different rates of pay to employees of different sexes who perform “equal work”, per s. 42(1) does not apply if the difference in the rate of pay is made on the basis of one of the exceptions set out in subsection (2).

(a) A seniority system - s. 42(2)(a)

In order to fall within this exception, the difference in rate of pay must result from a system established by the employer in which employees’ compensation is at least partially based on their length of service or accumulated number of hours worked. The same system must apply to both employees being compared.

Note that where the employer does not have an established seniority system, a difference in rate of pay may be still be based on a “seniority-like” factor per subsection (d) below. For example, a longer-term employee may earn a higher rate of pay than a newly hired employee based informally on years of service.

(b) A merit system - s. 42(2)(b)

In order to fall within this exception, the difference in rate of pay must result from a system established by the employer in which employees’ compensation is at least partially based on their achievements and/or how well they perform their jobs. The system must apply to both employees being compared.

For example, an employer may increase employees’ hourly wages by a set percentage if they meet a pre-established sales target. If an employee of one sex reaches the sales target before an employee of the opposite sex, and therefore earns a greater hourly wage, the difference in rate of pay is permissible under this provision.

Note that where the employer does not have an established merit system, a difference in rate of pay may be still be based on a “merit-like” factor (such as high productivity, above-average sales, exceptional customer service etc.) per subsection (d) below. Please see the discussion below for more information.

(c) A system that measures earnings by quantity or quality of production - s. 42(2)(c)

This exception provides that a difference in rate of pay is not prohibited where the workplace has a system in place that measures earnings by quantity or quality of production. In order for this exception to apply, the system must apply to both employees being compared.

For example, an employer operates a widget factory and employs manufacturing employees who perform equal work. All employees receive $1.00 per completed widget, and receive a pay increase of 15 cents per widget after they complete 1,000 widgets. A difference in rate of pay will be justified where an employee of one sex earns $1.00 per completed widget because he or she has not yet reached the 1,000 threshold, while a comparator employee of the opposite sex who has already completed 1,000 widgets earns $1.15 per widget.

(d) Any other factor other than sex - s. 42(2)(d)

Note that between April 1, 2018 and December 31, 2018, this provision read as “Any other factor other than sex or employment status”. “Employment status” was added to s.42(2)(d) on April 1, 2018 as a result of the Fair Workplaces Better Jobs Act, 2017; the amendment was consistent with the prohibition set out in s.42.1 that also came into force on April 1, 2018. The “or employment status” wording was repealed on January 1, 2019 as a result of the Making Ontario Open for Business Act, 2018, which also repealed s.42.1 in its entirety.

This clause provides that the prohibition against paying different rates of pay to two employees of different sexes performing “equal work” per s. 42(1) does not apply if the difference is based on any factor other than sex. The broad scope of this exception acknowledges the myriad of factors other than sex come into play when pay rates are determined. In practice, this exception allows for a differentiation in rate of pay based on a wide variety of factors, including those that are subjective. Note, however, that the factor (or factors) that the employer provides as the reason(s) for the pay differential must be the actual reason(s). Employment standards officers will review and assess the credibility of any available evidence (which may in some cases be limited to the employer’s assertions) in order to satisfy him or herself that the reason(s) provided are in fact the actual reason(s) for the pay differential. Note that it is possible for a “factor” used to support a difference in the rate of pay to fit within the s. 42(2)(d) exception, but to be prohibited by legislation that is not administered by the Ministry of Labour, such as the Ontario Human Rights Code.

The key determination to be made in applying this provision is whether the “factor” used to support the difference in the rate of pay is sex. The question to be answered is whether the employee is earning a particular rate of pay because he is male or she is female. If the answer is yes, this exception does not apply and equal pay is required. If the factor is anything other than sex, then this exception does apply.

Some examples of factors that the Program generally considers to fall under “any other factor other than sex” include:

Differences in experience or educational achievement

Even where the work is “equal”, a difference in relevant experience with another employer or educational achievement may be a “factor other than sex”, such that the requirement for equal pay would not apply.

Length of service with the employer

Where the employer does not have an established seniority system, a “seniority-like” factor may be a “factor other than sex”, such that the requirement for equal pay would not apply. For example, a new hire may receive a lesser rate of pay than an employee who has been employed for a longer period of time on the basis that he or she has less service.

Coverage under a collective agreement

This policy does not apply where the two employees being compared are covered by the same collective agreement. Note, however, that in this situation, differences in rate of pay might be substantiated under other exceptions.

Red circling

Some employers engage in the practice of “red circling”. This means they maintain an employee’s rate of pay, even after transferring the employee to a job that normally pays a lower rate. An example of this is an employee transferred to a lower paying job due to a company reorganization. Under a pure "red-circling" system, the higher-paid employee would remain at the present rate of pay until the lower paid employees catch up. "Red circling" is generally considered to be a “factor other than sex”, meaning that the requirement for equal pay would not apply.

Job market conditions

The nature of the job market at a particular point in time may require an employer to offer a higher rate of pay to attract an employee to fill a particular role in its organization if the supply of qualified candidates is low. This is generally considered to be a “factor other than sex”, meaning that the requirement for equal pay would not apply.

Nepotism

Paying an employee more (or less) than another employee because he or she is part of the employer’s family is a “factor other than sex”, meaning that the requirement for equal pay would not apply.

For example, an employer who sets up his or her business affairs in order to take advantage of tax benefits such as income splitting may pay his or her spouse more than another employee in order to maximize tax benefits.

Wage premiums

In some cases, a difference in the shifts that are being worked by employees may mean that “equal work” is not being performed (e.g. a security guard on the day shift and a security guard on the night shift who have very different duties, level of responsibility and working conditions).

In certain situations, despite work between two employees on different shifts being “equal” per s. 42(1), the employer may pay a wage premium. This may be, for example, to compensate employees who work the evening shift for the inconvenience of working at that time. This rationale for providing a wage premium is considered to be a “factor other than sex”, meaning that the requirement for equal pay would not apply.

Temporarily working in another role

The question may arise as to whether an employee temporarily working in another role is an exception to the requirement in s. 42. An employee, for example, may temporarily occupy another position that has a different rate of pay, yet maintain the rate of pay associated with their “home” position (which may be higher or lower than the pay rate of the other employees in the temporary position.)

Whether or not this raises equal pay concerns will depend on the circumstances. For example, there may be an issue as to whether the employee who is temporarily performing the duties of another position is performing “equal work” to the other employees in that position. For example, the employee who is temporarily performing the duties may have substantially fewer or more responsibilities than the other employee(s) (e.g. a non-managerial employee may be in an acting assignment as manager but not be required to perform the tasks associated with disciplining employees).

If “equal work” is being performed by the employee who is temporarily in the position and an employee of the opposite sex whose “regular” job is to work in that position, the employer may nonetheless be permitted to maintain the differential in their rates of pay on the basis of any other factor other than sex. For example, assume that an employee who is temporarily in a position is permitted to maintain his or her usual, higher rate of pay for the duration of the temporary assignment. The employer may maintain that the difference in pay rate was based on the sudden or urgent need to fill the position and that the only practical way to do so was to transfer the higher-paid employee at his or her current rate of pay. The employer might also have a policy establishing as its regular practice that employees who temporarily “fill in” doing work in another role maintain their higher rate of pay. These reasons both constitute “any other factor other than sex” under s. 42(2)(d).

Conversely, if the employee who is temporarily in the position has a lower rate of pay than an employee doing “equal work”, the employer may pay that employee less because – although the work is “equal” (as per s. 42(1)) – the employee temporarily in the position is less experienced, not expected to perform all of the duties normally associated with that position, or on the basis of any other factor as discussed elsewhere in this section. All of these reasons constitute “any other factor other than sex”. However, if the difference in rate of pay is not based on a factor other than sex, the employer will be required to equalize the pay rates.

Other

An employer may pay an employee a higher rate of pay based on a factor such as the employee being well liked by key clients, being particularly friendly or because that employee is seen as always “going the extra mile”. Examples such as these, even though they may be based on the subjective opinion of the employer, may still constitute a “factor other than sex or employment status” meaning the requirement for equal pay would not apply.

Reduction prohibited - s. 42(3)

Section 42(3) prohibits an employer from reducing an employee’s rate of pay to comply with s. 42(1). This means that where there is a difference in the rate of pay between employees in contravention of section 42, the employer cannot lower the higher-paid employee’s rate of pay to correct the violation.

For example, a male and a female both work as lifeguards performing equal work and none of the exceptions in s. 42(2) apply. The male employee earns a salary of $45,000 per year. The female employee earns $3,500 per month, which is equivalent to $42,000 per year. The employees work the same number of hours. The employer is prohibited from reducing the male employee’s rate of pay to $42,000 per year to comply with s. 42(1).

Organizations - s. 42(4)

This section reinforces s. 5(1) of the Act, which states:

A trade union or other organization is prohibited from causing or attempting to cause the employer to pay different rates of pay to employees who do “equal work” per s. 42(1) on the basis that they are different sexes.

Deemed wages - s. 42(5)

This section permits an employment standards officer to determine the amount owed to an employee as a result of the contravention of s. 42(1), and deems that amount owing to be unpaid wages. An employment standards officer may consequently issue an order to pay wages under ESA Part XXII, s. 103 against an employer. This order may include the amount necessary to correct the inequality in the rate of pay between employees and may also include amounts owing under other standards that were calculated in the relevant period using the rate of pay that was found to violate s. 42. This may include, for example, vacation pay, public holiday pay, overtime pay, termination pay, etc.

Note that a director order to pay cannot be issued in relation to these deemed wages per s. 81(3).

Written response - s. 42(6)

Subsection 42(6) came into force on April 1, 2018. It was added to section 42 as a result of the Fair Workplaces, Better Jobs Act, 2017. It was repealed pursuant to the Making Ontario Open for Business Act, 2018 effective January 1, 2019.

This subsection provides that employees who believe that their employer is not complying with s. 42(1) may ask the employer to review their rate of pay. In response, the employer must review the employee’s rate of pay and either adjust it upwards to address the contravention, or provide a written response that sets out the reasons why the employer disagrees with the employee’s belief that there is a contravention.

The requirement that the employer’s response be in writing is satisfied if the response is provided to the employee on paper (for example, in a printed letter) or electronically.

Section 42(6)(b) does not specify a timeline within which the employer must provide the written response. It is Program policy that the employer’s response must be provided within a reasonable timeframe; what is reasonable will depend on the particular circumstances.

Note that this section does not require an employee to request a review of their rate of pay as a prerequisite to filing a claim under ESA Part XXII, s. 96(1). In other words, an employee who believes his or her rate of pay does not comply with s. 42(1) may file a claim without ever requesting a rate of pay review from the employer.

The requirement in this subsection to adjust the employee’s pay rate applies prospectively only; it does not require the employer to retroactively pay the employee what they would have earned had they received equal pay prior to the adjustment. However, an employee may file a claim to recover any amounts owing prior to the adjustment (subject to the limitations on recovery set out in section 111).

Section 42.1 of the Employment Standards Act, 2000 was repealed effective January 1, 2019 as a result of the Making Ontario Open for Business Act, 2018. This section is therefore no longer in force. However, employees may still have a complaint relating to section 42.1 that arose during the period of time when the section was in force: from April 1, 2018 to December 31, 2018. For that reason, the Program’s interpretation of this section remains as part of this publication, though the text appears in red to highlight that the relevant provisions have been repealed.

Section 42.1 – Difference in employment status

Difference in employment status – s. 42.1(1)

Subsection 42.1(1) was repealed effective January 1, 2019 as a result of the Making Ontario Open for Business Act, 2018. This provision is no longer in force. The discussion of this provision is being maintained for use in situations that arose when it was in force.

Section 42.1 was added to the Employment Standards Act, 2000 (ESA 2000) as a result of the Fair Workplaces, Better Jobs Act, 2017; it came into effect on April 1, 2018. It was repealed effective January 1, 2019 by the Making Ontario Open for Business Act, 2018.

This section prohibits an employer from paying an employee a lower rate of pay than another employee on the basis of a difference in employment status, where the employees perform “equal work”, as established in clauses (a) through (c). This requirement is subject to certain exceptions that are set out in s. 42.1(2) of the ESA 2000.

Note that certain employees are exempted from s. 42.1 – see O Reg 285/01, s. 9.1 for further information.

Employees of different employment status

Section 42.1 addresses a difference in the rate of pay between two employees of the same employer with different employment status.

Section 1 of the ESA defines difference in employment status as follows:

See ESA Part I, s. 1 for a discussion of this definition.

Under this provision, the comparison of work performed must be between employees with a difference in employment status. Two employees of the same “employment status” could be paid different rates of pay for performing “equal work” with no violation of this section occurring. The work being compared is work that is being performed by the two employees contemporaneously.

Note that subject to certain exceptions, s. 42(1) prohibits employers from paying employees different rates of pay for “equal work” if one employee is being paid less due to a difference in sex. As such, although it would not be a violation of s. 42.1 for two employees of the same “employment status” to be paid differently, a potential violation could exist under sections 42 if there is a difference in sex between these employees. Also, where an employee is an assignment employee, the employer is prohibited from paying the assignment employee at a rate of pay less than the rate paid to an employee of the client when performing equal work, see section 42.2.

Rate of pay

For this provision to apply, there must be a difference in the rate of pay between two employees of different employment status who perform “equal work”.

“Rate of pay” is not defined in the legislation.

It is Program policy that, for the purposes of Part XII, rate of pay generally includes:

Hourly rates
Salaries
Piece work rates
Commission rates
Overtime pay rates

It is Program policy that, for the purposes of Part XII, rate of pay generally does not include:

Vacation pay rates
Tips or other gratuities, including tip pool percentages
Expenses and travel allowances
Benefit plans (or a payment in lieu of benefits)

When determining whether there is a difference in the rate of pay between employees earning commissions, or employees who are subject to piece work rates, an employment standards officer will compare the rates applicable to both employees. For example, if a full-time and a part-time employee both earn minimum wage plus 15% commission on all sales, the employees will be considered to be paid the same rate of pay even if one of the employees takes home a greater dollar amount because that employee made more sales. A similar approach will be taken with respect to overtime. As long as two employees are subject to the same overtime rate and overtime threshold, there would not be a difference in the rate of overtime pay between the two employees. One employee may earn more overtime pay than another because they work more hours, but this would not mean that there is a difference in the overtime rate between the employees.

One question that might arise is how to conduct a comparison in rate of pay between two employees who do “equal work” but who are paid pursuant to different compensation schemes. Comparing a set hourly rate or yearly salary to earnings that may fluctuate based on employee performance, such as commission or piece work, is not a viable assessment. It is Program policy that, generally, comparisons can only be made between two employees with the same remuneration scheme – in other words, only by comparing “apples to apples”. For example, if a female employee earns $24 an hour, an employment standards officer will not compare her rate of pay with a male employee who earns $18 an hour plus a commission rate. One exception, however, is the comparison between employees earning an hourly, weekly, or monthly rate, or a yearly salary; the comparison becomes “apples to apples” once it is established what each employee earns as an hourly rate and thus a direct comparison is possible. Similarly, an “apples to apples” comparison is possible where two employees, for example, both earn $25 per hour but one of the two also earns a 10% commission on sales. In this case, though there are different remuneration schemes, a direct comparison is possible because the employees earn exactly the same rate in one element of the remuneration scheme. In this example, the obvious outcome is that the rates of pay are not the same.

“Equal work”

For this provision to apply, employees of different employment status who are being compared must perform “equal work”. The elements that make up “equal work” are established in clauses 42.1(a) through (c). In order for work to be considered equal, all of the following must be present:

The employees perform substantially the same kind of work;
The work is performed in the same establishment;
The work being performed requires substantially the same skill, effort and responsibility; and
The work is performed under similar working conditions.

Each of these elements is examined individually in the analysis below.

1. Substantially the same kind of work

The employees being compared must perform substantially the same kind of work. The Fair Workplaces Better Jobs Act, 2017 introduced a definition to Part XII of the ESA 2000 that took effect on April 1, 2018. Section 41.2 defines “substantially the same” to mean substantially the same but not necessarily identical.

In other words, jobs do not have to be identical for this standard to apply. "Substantially the same kind of work" refers to the main characteristics or the core duties of the work. Minor differences in job content do not, in and of themselves, make the section inapplicable.

When considering whether the kind of work is “substantially the same”, the work to be compared is generally work that the employees are performing contemporaneously. The comparison is to be made on the basis of the actual work the employees perform, not the terms of hiring, or the job descriptions.

2. In the same establishment

The term "establishment" is defined in s. 1 of the ESA 2000 as follows:

"Establishment" means a location where the employer carries on business. However, two or more locations of the employer will be considered a single establishment if:

They are in the same municipality; or
There are common bumping rights for at least one employee across municipal boundaries.

See ESA Part I, s. 1 of the Manual for further information regarding the definition of establishment.

3. Performance requires substantially the same skill, effort and responsibility

Per s. 42.1(1)(b), the performance of the work must require substantially the same skill, effort and responsibility. These are three separate requirements, each of which must be met in order for s. 42.1 to apply.

This clarifies that the skill, effort and responsibilities do not need to be exactly the same or identical in every respect to be considered substantially the same. Minor or inconsequential differences do not render the standard inapplicable.

(i) Performance requires substantially the same skill

(ii) Performance requires substantially the same effort

The sporadic performance of an activity that may require extra physical or mental effort does not suffice to establish that the jobs require substantially different levels of effort.

(iii) Performance requires substantially the same responsibility

Responsibility for the safety of others;
Supervision of others;
Handling of cash;
Safeguarding of confidential or restricted information; and
Supervision received by the employee.

4. Similar working conditions

The working conditions between the two jobs being compared must be “similar”. (Note this is a lower threshold than “substantially the same” as defined in s. 41.2 and applied in in the “substantially the same kind of work” and “substantially the same skill, effort and responsibility” parts of the test.)

"Working conditions" generally refer to factors such as:

the working environment, such as an office or warehouse
exposure to the elements, such as work that must be performed in severe weather conditions
health and safety hazards, such as working at heights or exposure to chemicals

For example, appliance repairers who spend all their time on the employer’s premises do not have similar working conditions to appliance repairers who do their work attending at customers’ homes.

Exception – s. 42.1(2)

Subsection 42.1(2) was repealed effective January 1, 2019 as a result of the Making Ontario Open for Business Act, 2018. This provision is no longer in force. The discussion of this provision is being maintained for use in situations that arose when it was in force.

The prohibition against paying different rates of pay to employees of different employment status who perform “equal work”, per s. 42.1(1) does not apply if the difference in the rate of pay is made on the basis of one of the exceptions set out in subsection (2).

(a) A seniority system – s. 42.1(2)(a)

(b) A merit system – s. 42.1(2)(b)

In order to fall within this exception, the difference in rate of pay must result from a system established by the employer in which employees’ compensation is at least partially based on their achievements and/or how well they perform their jobs. The system must apply to both employees being compared.

For example, an employer may increase employees’ hourly wages by a set percentage if they meet a pre-established sales target. If an employee of one employment status reaches the sales target before an employee with a different employment status, and therefore earns a greater hourly wage, the difference in rate of pay is permissible under this provision.

(c) A system that measures earnings by quantity or quality of production – s. 42.1(2)(c)

For example, an employer operates a widget factory and employs manufacturing employees who perform equal work. All employees receive $1.00 per completed widget, and receive a pay increase of 15 cents per widget after they complete 1,000 widgets. A difference in rate of pay will be justified where a temporary employee earns $1.00 per completed widget because they had not yet reached the 1,000 threshold, while a permanent employee who has already completed 1,000 widgets earns $1.15 per widget.

(d) Any other factor other than sex or employment status – s. 42.1(2)(d)

This clause provides that the prohibition against giving different rates of pay to two employees of different employment status performing “equal work” per s. 42.1(1) does not apply if the difference is based on any factor other than sex or employment status. The broad scope of this exception acknowledges the myriad of factors other than sex or employment status that come into play when pay rates are determined. In practice, this exception allows for a differentiation in rate of pay based on a wide variety of factors, including those that are subjective. Note, however, that the factor (or factors) that the employer provides as the reason(s) for the pay differential must be the actual reason(s). Employment standards officers will review and assess the credibility of any available evidence (which may in some cases be limited to the employer’s assertions) in order to satisfy themself that the reason(s) provided are in fact the actual reason(s) for the pay differential. Note that it is possible for a “factor” used to support a difference in the rate of pay to fit within the s. 42.1(2)(d) exception, but to be prohibited by legislation that is not administered by the Ministry of Labour, such as the Ontario Human Rights Code.

The key determination to be made in applying this provision is whether the “factor” used to support the difference in rate of pay is sex or employment status. If it is, this exception does not apply. If the factor is anything other than sex or employment status, then generally this exception does apply.

When determining whether the difference in rate of pay is based on “employment status”, the question to be answered is whether the employee is earning a particular rate of pay because of the number of hours they regularly work or because of the term of their employment (such as permanent, temporary, seasonal, or casual).

When determining whether the difference in rate of pay is based on “sex”, the question to be answered is whether the employee is earning a particular rate of pay because he is male or she is female.

If the answer to any of these three questions is yes, then the exception does not apply and equal pay is required per subsection 42.1(1).

Some examples of factors that the Program generally considers to fall under “any other factor other than sex or employment status” include:

Differences in experience or educational achievement

Even where the work is “equal”, a difference in relevant experience with another employer or educational achievement may be a “factor other than sex or employment status”, such that the requirement for equal pay would not apply.

Length of service with the employer

Where the employer does not have an established seniority system, a “seniority-like” factor may be a “factor other than sex or employment status”, such that the requirement for equal pay would not apply. For example, a new hire may receive a lesser rate of pay than an employee who has been employed for a longer period of time on the basis that they have less service.

Coverage under a collective agreement

Where one of the two employees being compared is covered by a collective agreement: the Program considers a difference in rate of pay that arises out of the collective bargaining process to be a “factor other than sex or employment status” such that the requirement for equal pay would not apply. For practical purposes, this means that a non-unionized employee and a unionized employee of different employment status can receive different rates of pay for performing “equal work”.

Red circling

Some employers engage in the practice of “red circling”. This means they maintain an employee’s rate of pay, even after transferring the employee to a job that normally pays a lower rate. An example of this is an employee transferred to a lower paying job due to a company reorganization. Under a pure "red-circling" system, the higher-paid employee would remain at the present rate of pay until the lower paid employees catch up. "Red circling" is generally considered to be a “factor other than sex or employment status”, meaning that the requirement for equal pay would not apply.

Job market conditions

The nature of the job market at a particular point in time may require an employer to offer a higher rate of pay to attract an employee to fill a particular role in its organization if the supply of qualified candidates is low. This is generally considered to be a “factor other than sex or employment status”, meaning that the requirement for equal pay would not apply.

Nepotism

Paying an employee more (or less) than another employee because they are part of the employer’s family is a “factor other than sex or employment status”, meaning that the requirement for equal pay would not apply.

Wage premiums

In certain situations, despite work between two employees on different shifts being “equal” per s. 42.1(1), the employer may pay a wage premium. This may be, for example, to compensate employees who work the evening shift for the inconvenience of working at that time. This rationale for providing a wage premium is considered to be a “factor other than sex or employment status”, meaning that the requirement for equal pay would not apply.

Temporarily working in another role

The question may arise as to whether an employee temporarily working in another role is an exception to the requirement in s. 42.1. An employee, for example, may temporarily occupy another position that has a different rate of pay, yet maintain the rate of pay associated with their “home” position (which may be higher or lower than the pay rate of the other employees in the temporary position).

If “equal work” is being performed by the employee who is temporarily in the position and an employee of a different employment status whose “regular” job is to work in that position, the employer may nonetheless be permitted to maintain the differential in their rates of pay on the basis of any other factor other than sex or employment status. For example, assume that an employee who is temporarily in a position is permitted to maintain their usual, higher rate of pay for the duration of the temporary assignment. The employer may maintain that the difference in pay rate was based on the sudden or urgent need to fill the position and that the only practical way to do so was to transfer the higher-paid employee at their current rate of pay. The employer might also have a policy establishing as its regular practice that employees who temporarily “fill in” doing work in another role maintain their higher rate of pay. These reasons both constitute “any other factor other than sex or employment status” under s. 42.1(2)(d).

Conversely, if the employee who is temporarily in the position has a lower pay rate than an employee doing “equal work”, the employer may pay that employee less because – although the work is “equal” (as per s. 42.1(1)) – the employee temporarily in the position is less experienced, not expected to perform all of the duties normally associated with that position, or on the basis of any other factor as discussed elsewhere in this section. All of these reasons constitute “any other factor other than sex or employment status”. However, if the difference in rate of pay is not based on a factor other than sex or employment status, the employer will be required to equalize the pay rates.

(Note that temporarily working in another position does not necessarily involve a change in employment status. For example, a permanent full-time employee may remain a permanent full-time employee when taking on a temporary work assignment.)

Other

An employer may pay an employee a higher rate of pay based on a factor such as the employee being well liked by key clients, being particularly friendly or because that employee is seen as always “going the extra mile”. Examples such as these, even though they may be based on the subjective opinion of the employer, constitute a “factor other than sex” meaning the requirement for equal pay would not apply.

Reduction prohibited – s. 42.1(3)

Subsection 42.1(3) was repealed effective January 1, 2019 as a result of the Making Ontario Open for Business Act, 2018. This provision is no longer in force. The discussion of this provision is being maintained for use in situations that arose when it was in force.

Section 42.1(3) prohibits an employer from reducing an employee’s rate of pay to comply with s. 42.1(1). This means that where there is a difference in the rate of pay between employees in contravention of section 42.1, the employer cannot lower the higher-paid employee’s rate of pay to correct the violation.

For example, two employees of different employment status both work as cooks performing equal work and none of the exceptions in s. 42.1(2) apply. The permanent employee earns a salary of $45,000 per year. The temporary employee earns $3,500 per month, which is equivalent to $42,000 per year. The employees work the same number of hours.The employer is prohibited from reducing the first employee’s rate of pay to $42,000 per year to comply with s. 42.1(1).

Organizations – s. 42.1(4)

Subsection 42.1(4) was repealed effective January 1, 2019 as a result of the Making Ontario Open for Business Act, 2018. This provision is no longer in force. The discussion of this provision is being maintained for use in situations that arose when it was in force.

This section reinforces s. 5(1) of the Act, which states:

A trade union or other organization is prohibited from causing or attempting to cause the employer to pay different rates of pay to employees who do “equal work” per s. 42.1(1) on the basis that the employees have different employment status.

Deemed wages – s. 42.1(5)

Subsection 42.1(5) was repealed effective January 1, 2019 as a result of the Making Ontario Open for Business Act, 2018. This provision is no longer in force. The discussion of this provision is being maintained for use in situations that arose when it was in force.

This section permits the employment standards officer to determine the amount owed to an employee as a result of the contravention of s. 42.1(1), and deems that amount owing to be unpaid wages. An employment standards officer may consequently issue an order to pay wages under ESA Part XXII, s. 103 against an employer. This order may include the amount necessary to correct the inequality in the rate of pay between employees and may also include amounts owing under other standards that were calculated in the relevant period using the rate of pay that was found to violate s. 42.1. This may include, for example, vacation pay, public holiday pay, overtime pay, termination pay, etc.

Note that a director order to pay cannot be issued in relation to these deemed wages per s. 81(3).

Written response – s. 42.1(6)

Subsection 42(6) was repealed effective January 1, 2019 as a result of the Making Ontario Open for Business Act, 2018. This provision is therefore no longer in force. However, the Program’s interpretation of this provision remains in this publication as complaints may still arise relating to the period of time when the provision was in force: from April 1, 2018 to December 31, 2018.

This subsection provides that employees who believe that their employer is not complying with s. 42.1(1) may ask the employer to review their rate of pay. In response, the employer must review the employee’s rate of pay and either adjust it upwards to address the contravention, or provide a written response that sets out the reasons why the employer disagrees with the employee’s belief that there is a contravention.

The requirement that the employer’s response be in writing is satisfied if the response is provided to the employee on paper (for example, in a printed letter) or electronically.

Section 42.1(6)(b) does not specify a timeline within which the employer must provide the written response. It is Program policy that the employer’s response must be provided within a reasonable timeframe; what is reasonable will depend on the particular circumstances.

Note that this section does not require an employee to request a review of their rate of pay as a prerequisite to filing a claim under ESA Part XXII, s. 96(1). In other words, an employee who believes their rate of pay does not comply with s. 42.1(1) may file a claim without ever requesting a review of their rate of pay from their employer.

The requirement in this subsection to adjust the employee’s pay rate applies prospectively only; it does not require the employer to retroactively pay the employee what they would have earned had they received equal pay prior to the adjustment. However, an employee may file a claim in order to recover any amounts owing prior to the adjustment (subject to the limitations on recovery set out in section 111).

Transition, collective agreement – s. 42.1(7)

Subsection 42.1(7) was repealed effective January 1, 2019 as a result of the Making Ontario Open for Business Act, 2018. This provision is no longer in force. The discussion of this provision is being maintained for use in situations that arose when it was in force.

Same, limit – s. 42.1(8)

Subsection 42.1(8) was repealed effective January 1, 2019 as a result of the Making Ontario Open for Business Act, 2018. This provision is no longer in force. The discussion of this provision is being maintained for use in situations that arose when it was in force.

These provisions, read together, provide that if a collective agreement that that is in effect on April 1, 2018 contains a provision that permits differences in the rate of pay based on employment status, the provision of the collective agreement will prevail even if it conflicts with the ESA. However, the conflicting provisions will cease to prevail on the earlier of the date the collective agreement expires or January 1, 2020.

Section 42.2 of the Employment Standards Act, 2000 was repealed effective January 1, 2019 as a result of the Making Ontario Open for Business Act, 2018. This section is therefore no longer in force. However, employees may still have a complaint relating to section 42.2 that arose during the period of time when the section was in force: from April 1, 2018 to December 31, 2018. For that reason, the Program’s interpretation of this section remains as part of this publication, though the text appears in red to highlight that the relevant provisions have been repealed.

Difference in assignment employee status - s. 42.2(1)

Subsection 42.2(1) was repealed effective January 1, 2019 as a result of the Making Ontario Open for Business Act, 2018. This provision is no longer in force. The discussion of this provision is being maintained for use in situations that arose when it was in force.

Section 42.2 was added to the Employment Standards Act, 2000 (ESA) as a result of the Fair Workplaces, Better Jobs Act, 2017; it came into effect on April 1, 2018. It was repealed effective January 1, 2019 by the Making Ontario Open for Business Act, 2018.

This section prohibits a temporary help agency from paying an assignment employee a lower rate of pay than that paid to an employee of the client, where the employees perform “equal work” as established in clauses (a) through (c). This requirement is subject to the exception set out in s. 42.2(2) of the ESA.

Difference in assignment employee status

Section 42.2 addresses a difference in the rate of pay between an assignment employee and an employee of a client.

ESA Part I, s. 1 defines assignment employee, temporary help agency, and client as follows:

See ESA Part I, s. 1 for a discussion of these definitions.

For this provision to apply, the comparison of work performed must be between an assignment employee and an employee of a client. An assignment employee cannot be paid a lower rate of pay than a client employee, where the two perform “equal work”. The work being compared is work that is being performed by the two employees contemporaneously.

(Note that subject to certain exceptions, s. 42(1) and 42.1(1) prohibit employers from paying employees different rates of pay for “equal work” due to a difference in sex or in employment status. The comparisons under sections 42 and 42.1 are not between an assignment employee and a client employee; in those contexts, an assignment employee would compare himself or herself to another assignment employee employed by the same temporary help agency.)

Rate of pay

For this provision to apply, there must be a difference in the rate of pay between the assignment employee and the employee of the client who perform “equal work”.

“Rate of pay” is not defined in the legislation.

It is Program policy that, for the purposes of Part XII, rate of pay generally includes:

Hourly rates
Salaries
Piece work rates
Commission rates
Overtime pay rates

It is Program policy that, for the purposes of Part XII, rate of pay generally does not include:

Vacation pay rates
Tips or other gratuities, including tip pool percentages
Expenses and travel allowances
Benefit plans (or payments in lieu of benefits)

There may be other forms of remuneration that could be captured under “rate of pay”, that are not addressed in the list above. For example, there may be situations where certain bonus structures would properly fall under “rate of pay”, whereas other bonus structures would not. In assessing whether particular remuneration contributes to an employee’s “rate of pay”, an employment standards officer will consider all relevant factors, including the specifics of the compensation system, its purpose, and the legislative intent behind Part XII.

When determining whether there is a difference in the rate of pay between employees earning commissions, or employees who are subject to piece work rates, an employment standards officer will compare the rates applicable to both employees. For example, if an assignment employee and an employee of the client both earn minimum wage plus 15% commission on all sales, the two individuals will be considered to be paid the same rate of pay even if one takes home a greater dollar amount because that employee made more sales. A similar approach will be taken with respect to overtime. As long as the assignment employee and the client employee are subject to the same overtime rate and overtime threshold, there would not be a difference in the rate of overtime pay between the two. One person may earn more overtime pay than another because they work more hours, but this would not mean that there is a difference in the overtime rate between them.

One question that might arise is how to conduct a comparison in “rate of pay” between an assignment employee and a client employee who do “equal work” but who are paid pursuant to different compensation schemes. Comparing a set hourly rate or yearly salary to earnings that may fluctuate based on employee performance, such as commission or piece work, is not a viable assessment. It is Program policy that, generally, comparisons can only be made between two employees with the same remuneration scheme - in other words, only by comparing “apples to apples”. For example, if an assignment employee earns $24 an hour, an employment standards officer will not compare her rate of pay with that of a client employee who earns $18 an hour plus a commission rate. One exception, however, is the comparison between employees earning an hourly, weekly, or monthly rate, or a yearly salary; the comparison becomes “apples to apples” once it is established what each employee earns as an hourly rate and thus a direct comparison is possible. Similarly, an “apples to apples” comparison is possible where two employees, for example, both earn $25 per hour but one of the two also earns a 10% commission on sales. In this case, though there are different remuneration schemes, a direct comparison is possible because the employees earn exactly the same rate in one element of the remuneration scheme. In this example, the obvious outcome is that the rates of pay are not the same.

“Equal Work”

For this provision to apply, the assignment employee and employee of the client who are being compared must perform “equal work”. The elements that make up “equal work” are established in clauses 42.2(a) through (c). In order for work to be considered equal, all of the following must be present:

The assignment employee and client employee perform substantially the same kind of work;
The work is performed in the same establishment;
The work being performed requires substantially the same skill, effort and responsibility; and
The work is performed under similar working conditions.

Each of these elements is examined individually in the analysis below.

1. Substantially the same kind of work

The assignment employee and client employee being compared must perform substantially the same kind of work. The Fair Workplaces Better Jobs Act, 2017 introduced a definition to Part XII of the ESA 2000 that took effect on April 1, 2018. Section 41.2 defines “substantially the same” to mean substantially the same but not necessarily identical.

In other words, jobs do not have to be identical for this standard to apply. "Substantially the same kind of work" refers to the main characteristics or the core duties of the work. Jobs do not have to be identical for this standard to apply. Minor differences in job content do not, in and of themselves, make the section inapplicable.

When considering whether the kind of work is “substantially the same”, the work to be compared is work that is being performing contemporaneously. The comparison is to be made on the basis of the actual work the employees perform, not the terms of hiring, or the job descriptions.

For example, where two employees perform identical tasks 90% of the time and different tasks only 10% of the time, an officer may conclude that they perform substantially the same kind of work – i.e. the time spent on different tasks is not so extensive as to support a finding that the overall kind of work being performed is not substantially the same.

2. In the same establishment

The term "establishment" is defined in s. 1 of the ESA 2000 as follows:

"Establishment" means a location where the employer carries on business. However, two or more locations of the employer will be considered a single establishment if:

They are in the same municipality; or
There are common bumping rights for at least one employee across municipal boundaries.

See ESA Part I, s. 1 of the Manual for further information regarding the definition of establishment.

3. Performance requires substantially the same skill, effort and responsibility

Per s. 42.2(1)(b), the performance of the work must require substantially the same skill, effort and responsibility. These are three separate requirements, each of which must be met in order for s. 42.2 to apply.

The fact that there are some differences in tasks between two jobs would not be a sufficient reason, in and of itself, to establish that the jobs do not require the same skill, effort or responsibility.

(i) Performance requires substantially the same skill

Skill refers to the degree or amount of knowledge or physical or motor capability needed to perform the job. It includes factors such as education, manual dexterity, experience and training, and is measured in terms of performance requirements.

(ii) Performance requires substantially the same effort

The sporadic performance of an activity that may require extra physical or mental effort does not suffice to establish that the jobs require substantially different levels of effort.

(iii) Performance requires substantially the same responsibility

Responsibility for the safety of others;
Supervision of others;
Handling of cash;
Safeguarding of confidential or restricted information; and
Supervision received by the employee.

4. Similar working conditions

"Working conditions" generally refer to factors such as:

the working environment, such as an office or warehouse
exposure to the elements, such as work that must be performed in severe weather conditions
health and safety hazards, such as working at heights or exposure to chemicals

For example, appliance repairers who spend all their time on the employer’s premises do not have similar working conditions to appliance repairers who do their work attending at customers’ homes.

Exception - s. 42.2(2)

Subsection 42.2(2) was repealed effective January 1, 2019 as a result of the Making Ontario Open for Business Act, 2018. This provision is no longer in force. The discussion of this provision is being maintained for use in situations that arose when it was in force.

The prohibition against paying different rates of pay to an assignment employee and an employee of the client who perform “equal work”, per s. 42.2(1) does not apply if the difference in the rate of pay is made on the basis of any other factor other than sex, employment status or assignment employee status.

The broad scope of this exception acknowledges the myriad of factors other than sex, employment status or assignment employee status that come into play when pay rates are determined. In practice, this exception allows for a differentiation in rate of pay based on a wide variety of factors, including those that are subjective. Note, however, that the factor (or factors) that the employer provides as the reason(s) for the pay differential must be the actual reason(s). Employment standards officers will review and assess the credibility of any available evidence (which may in some cases be limited to the employer’s assertions) in order to satisfy him or herself that the reason(s) provided are in fact the actual reason(s) for the pay differential. Note that it is possible for a “factor” used to support a difference in the rate of pay to fit within the s. 42.2(2) exception, but to be prohibited by legislation that is not administered by the Ministry of Labour, such as the Ontario Human Rights Code.

The key determination to be made in applying this provision is whether the “factor” used to support the difference in rate of pay is sex, employment status, or assignment employee status. If it is, this exception does not apply. If the factor is anything other than sex or employment status, this exception generally does apply.

When determining whether the difference in rate of pay is based on “employment status”, the question to be answered is whether the employee is earning a particular rate of pay because of the number of hours he or she regularly works or because of the term of his or her employment (such as permanent, temporary, seasonal, or casual).

When determining whether the difference in rate of pay is based on “assignment employment status”, the question to be answered is whether the employee is earning a particular rate of pay because she or he is an assignment employee.

If the answer to any of these questions is yes, then the exception does not apply and equal pay is required per subsection 42.2(1).

Some examples of factors that the Program generally considers to fall under “any other factor other than sex, employment status or assignment employee status” include:

Coverage under a collective agreement

Where one of the two employees being compared is covered by a collective agreement: the Program considers a difference in rate of pay that arises out of the collective bargaining process to be a “factor other than sex or employment status” such that the requirement for equal pay would not apply. For practical purposes, this means that a non-unionized assignment employee and a unionized employee of the client can receive different rates of pay for performing “equal work”.

This policy does not apply where the assignment employee and client employee being compared are covered by the same collective agreement. Note, however, that in this situation, differences in rate of pay might be substantiated under other exceptions.

An established seniority system at the client business

(Note that where a seniority system at a client business is established through a collective agreement, the discussion under the heading “Coverage Under a Collective Agreement” is applicable.)

In many workplaces that use assignment employees, those assignment employees are not subject to, or covered by, the client employers’ systems that establish client employees’ eligibility for wage increases.

A difference in rate of pay between an employee of a client and an assignment employee resulting from a seniority system established by the client (outside of a collective agreement) in which its employees’ compensation is based solely on a “mechanical” fact-based measurement (for example, length of service or accumulated number of hours of work), and in which increases in rate or pay happen automatically or “mechanically” without any normative assessment/evaluation by the employer, will generally be considered to fall within the exception. As such, a difference in rate of pay would be substantiated where, pursuant to such a system, the client employee has a greater length of service or more accumulated hours than the assignment employee.

For example:

A client employer’s employees progress through a wage grid based solely on their length of employment. Employees start at $18 per hour and automatically receive an $1 per hour increase after six months of employment.

Client Employee A started January 1, 2018 at $18 per hour and received a $1 per hour increase after six months of employment, on July 1, 2018.

Assignment Employees B and C perform “equal work” to Client Employee A. Assignment employees B and C are both paid $18 per hour. B has been on assignment in the workplace for seven months. C has been on assignment in the workplace for two months.

The difference in the rate of pay between Client Employee A and Assignment Employee B is not considered to fall within the exception. In this situation, the assignment employee is being paid a lower rate because the seniority system does not apply to him or her by virtue of the agency, and not the client, being his or her employer. Subsection 42.2(2) provides that an exception to the equal pay requirement cannot be based on the fact that the assignment employee is an assignment employee.

The difference in the rate of pay between Client Employee A and Assignment Employee C is considered to fall within the exception of “any other factor other than sex, employment status or assignment employee status”; here the difference in rate of pay is consistent with the established wage grid that determines employees’ compensation pursuant to their length of employment and that awards a $1 per hour increase after six months of employment, which Assignment Employee B has not yet completed. Accordingly, there would be no contravention.

For practical purposes, this means that where the client employer applies a purely mechanical, fact-based system to determine eligibility for wage increases, assignment employees who are doing “equal work” to client employees must be notionally treated as if that system applies to them for the purpose of determining if the exception applies.

Where the client’s system for determining pay rate increases for its employees is not based purely on a mechanical, fact-based measurement and instead includes a subjective performance appraisal or a normative assessment of some sort, the Program will generally consider the system to fall within the exception. In practice, this means that assignment employees who are doing “equal work” to client employees do not have to be notionally treated as if such systems apply to them for the purpose of determining their rate of pay. This is due to the nature of the relationship between assignment employees and client businesses: generally, it is not reasonable to require client businesses to conduct subjective performance appraisals/normative assessments on assignment employees. For a more detailed discussion on systems involving such evaluations, please see the heading “An Established Merit System at the Client Business”.

Length of service at the workplace with the employer

Where a client does not have an established seniority system, a “seniority-like” factor may be a “factor other than sex, employment status or assignment employee status”, such that the requirement for equal pay would not apply. For example, a longer-term employee of the client may earn a greater rate of pay than that given to a newly placed assignment employee.

An established merit system at the client business

(Note that where a merit system at a client business is established through a collective agreement, the discussion under the heading “Coverage Under a Collective Agreement” is applicable.)

In many workplaces that use assignment employees, those assignment employees are not subject to, or covered by, the client employers’ systems that establish employees’ eligibility for wage increases.

A difference in pay rate may result from a merit system established by the client employer in which its employees’ compensation is at least partially based on their achievements and/or how well they perform their jobs.

If a client employer has a merit system in place that is established outside of a collective agreement, whereby the client formally evaluates employees’ performance and that normative evaluation determines, at least in part, their pay rate, then this would generally be considered “any other factor other than sex, employment status or assignment employee status” such that the requirement for equal pay would not apply.

Since an assignment employee is not an employee of the client business, it generally cannot be expected that the assignment employee would be subject to a formal performance review by the client. It would also be completely impractical for the temporary help agency to attempt to review the assignment employee’s performance pursuant to the client’s evaluation criteria since the agency does not have a presence in the client’s workplace, meaning it would not have the necessary information or opportunity to observe performance on which to base an evaluation. So, due to the nature of the working relationship and the impracticalities of the agency applying the client’s evaluation criteria, it is the Program’s position that such a performance review cannot be required and the client’s merit system therefore cannot be applied to an assignment employee.

For practical purposes, this means that assignment employees who are doing “equal work” to the client employees do not have to be treated as if that system “notionally” applies to them for the purpose of the determination of their rate of pay.

An established system that measures earnings by quantity or quality of production at the client business

(Note that where a system that measures earnings by quanity or quality of production is established through a collective agreement, the discussion under the heading “Coverage Under a Collective Agreement” is applicable.)

A difference in rate of pay between an employee of a client and an assignment employee resulting from a system established by the client (outside of a collective agreement), that measures earnings by quanity or quality of production, in which its employees’ compensation is based solely on a mechanical fact-based measurement (for example, the number of widgets completed or the quality of completed widgets), and in which increases in rate or pay happen automatically or “mechanically” without any normative assessment/evaluation by the employer, will generally be considered to fall within the exception. For example, a difference in rate of pay would be substantiated where, pursuant to such a system, the client employee has produced a greater number or more quality widgets than the assignment employee.

An example of a system that measures earnings by quantity of production

A client employer operates a widget factory and employs manufacturing employees. All employees receive $1 per completed widget, and receive a pay increase of 15 cents per widget after they complete 1,000 widgets. If the same compensation system is applied to the assignment employee who enters the workplace, the fact that the client employee earns $1.15 per widget (based on the fact that she has already completed 1000 widgets) while the assignment employee earns only $1.00 per widget (because she has not yet completed 1,000 widgets) would be an exception to per s. 42.2(2). However, note that in order for this exception to apply, the assignment employee must also be paid $1.15 per widget once he or she has completed 1,000 widgets.

An example of a system that measures earnings by quality of production

A client employer operates a widget factory and employs manufacturing employees. All employees receive $1 per completed widget, and receive a pay increase of 15 cents per widget after the first 1,000 of their completed widgets meet a “mechanical”/objective quality test. If the same compensation system is applied to the assignment employee who enters the workplace, the fact that the client employee earns $1.15 per widget (based on the fact that she has already achieved the threshold of 1,000 quality widgets) while the assignment employee earns only $1.00 per widget (because she has not yet achieved the quality threshold) would be an exception to per s. 42.2(2). However, note that in order for the exception to apply, the assignment employee must also earn $1.15 per widget once he or she completes 1,000 widgets that meet the quality test.

But, Where the client’s system for determining pay rate increases for its employee is not based purely on a mechanical, fact-based measurement and instead includes a subjective performance appraisal or a normative assessment of some sort, that system will generally be considered to fall within the exception.

In practice, this means that where the client employer’s system involves a normative assessment of some sort, the assignment employees who are doing “equal work” to the client employees do not have to be notionally treated as though that system applies to them for the purpose of determining their rate of pay. This is due to the nature of the relationship between assignment employees and client businesses: it is generally not reasonable to require client businesses to conduct normative assessments on assignment employees. For a more detailed discussion on systems involving involving such evaluations, please see the heading “An Established Merit System at the Client Business”.

Differences in experience or educational achievement

Even where the work is “equal”, a difference in relevant experience or educational achievement may be a “factor other than sex or employment status”, such that the requirement for equal pay would not apply.

Red circling of a client employee

If a client employee has been “red circled”, and thus earns a higher rate than what someone normally performing that work would earn, this would generally be considered to be a “factor other than sex, employment status or assignment employee status”, meaning that the requirement for equal pay would not apply.

Job market conditions

The nature of the job market at a particular point in time may require an employer to offer a higher rate of pay to attract an employee to fill a particular role in its organization if the supply of qualified candidates is low. If a client employee was hired at a higher rate of pay for this reason, this is generally considered to be a “factor other than sex, employment status or assignement employee status”, meaning that the requirement for equal pay would not apply.

Wage premiums

In some cases, a difference in the shifts that are being worked by an assignment employee and an employee of the client may mean that “equal work” is not being performed (e.g. a security guard on the day shift and a security guard on the night shift who have very different duties, level of responsibility and working conditions).

In certain situations, despite work between two employees on different shifts being “equal” per s. 42.2(1), the employer may pay a wage premium. This may be, for example, to compensate employees who work the evening shift for the inconvenience of working at that time. This rationale for providing a wage premium is considered to be a “factor other than sex or employment status”, meaning that the requirement for equal pay would not apply.

Other

An employer may pay an employee a higher rate of pay based on a factor such as the employee being well liked by key clients, being particularly friendly or because that employee is seen as always “going the extra mile”. Examples such as these, even though they may be based on the subjective opinion of the employer, constitute a “factor other than sex or employment status” meaning the requirement for equal pay would not apply.

Reduction prohibited - s. 42.2(3)

Subsection 42.2(3) was repealed effective January 1, 2019 as a result of the Making Ontario Open for Business Act, 2018. This provision is no longer in force. The discussion of this provision is being maintained for use in situations that arose when it was in force.

Section 42.2(3) prohibits a client of a temporary help agency from reducing an employee’s rate of pay in order to help a temporary help agency comply with s. 42.2(1). This means that where there is a difference in the rate of pay in contravention of section 42.2, the client cannot lower its higher-paid employee’s rate of pay to assist the temporary help agency in complying with its obligation under 42.2(1).

For example, an assignment employee and a client employee both work as administrative assistants performing equal work and none of the exceptions in s. 42.2(2) apply The assignment employee earns $15.00 per hour. The client employee earns $18.00 per hour. The client is prohibited from reducing its employee’s pay to $15.00 in order to assist the temporary help agency in meetings its obligations under s. 42.2(1).

Organizations - s. 42.2(4)

Subsection 42.2(4) was repealed effective January 1, 2019 as a result of the Making Ontario Open for Business Act, 2018. This provision is no longer in force. The discussion of this provision is being maintained for use in situations that arose when it was in force.

This section reinforces s. 5(1) of the Act, which states:

A trade union or other organization is prohibited from causing or attempting to cause a temporary help agency to pay an assignment employee a lower rate of pay than that paid to an employee of the client, where they perform “equal work”.

Deemed wages - s. 42.2(5)

Subsection 42.2(5) was repealed effective January 1, 2019 as a result of the Making Ontario Open for Business Act, 2018. This provision is no longer in force. The discussion of this provision is being maintained for use in situations that arose when it was in force.

This section permits an employment standards officer to determine the amount owed to an assignment employee as a result of the contravention of s. 42.2(1), and deems that amount owing to be unpaid wages. An employment standards officer may consequently issue an order to pay wages under ESA Part XXII, s. 103 against a temporary help agency. This order may include the amount necessary to correct the inequality in the rate of pay and may also include amounts owing under other standards that were calculated in the relevant period using the rate of pay that was found to violate s. 42.2. This may include, for example, vacation pay, public holiday pay, overtime pay, termination pay, etc.

Note that a director order to pay cannot be issued in relation to these deemed wages per s. 81(3).

Section 74.18 imposes joint and several liability on temporary help agencies and the clients of temporary help agencies for certain unpaid wages owed in respect of a pay period where the assignment employee was assigned to perform work for the client. Per s. 74.18(3), the wages to which joint and several liability apply are limited to regular wages, overtime pay, public holiday pay and premium pay that was earned during the relevant pay period.

Section 74.18 applies in the context of wages deemed to be owing as a result of a contravention of s. 42.2(1). Please see the discussion at section 74.18 for more information.

Written response - s. 42.2(6)

Subsection 42.2(6) was repealed effective January 1, 2019 as a result of the Making Ontario Open for Business Act, 2018. This provision is no longer in force. The discussion of this provision is being maintained for use in situations that arose when it was in force.

This subsection provides that assignment employees who believe that the temporary help agency is not complying with s. 42.2(1) may ask the agency to review their rate of pay. In response, the temporary help agency must review the assignment employee’s rate of pay and either adjust upwards it to address the contravention, or provide a written response that sets out the reasons why it disagrees with the assignment employee’s belief that there is a contravention.

The requirement that the employer’s response be in writing is satisfied if the response is provided to the employee on paper (for example, in a printed letter) or electronically.

Section 42.12(6)(b) does not specify a timeline within which the temporary help agency must provide the written response. It is Program policy that the response must be provided within a reasonable timeframe; what is reasonable will depend on the particular circumstances.

Note that this section does not require an assignment employee to request a review of their rate of pay as a prerequisite to filing a claim under ESA Part XXII, s. 96(1). In other words, an employee who believes their rate of pay does not comply with s. 42.2(1) may file a claim without ever requesting a review of their rate of pay from the agency.

The requirement in this subsection to adjust the assignment employee’s pay rate applies prospectively only; it does not require the temporary help agency to retroactively pay the employee what they would have earned had they received equal pay prior to the adjustment. However, an assignment employee may file a claim in order to recover any amounts owing prior to the adjustment (subject to the limitations on recovery set out in section 111).

Transition, collective agreement – s. 42.2(7)

Subsection 42.2(7) was repealed effective January 1, 2019 as a result of the Making Ontario Open for Business Act, 2018. This provision is no longer in force. The discussion of this provision is being maintained for use in situations that arose when it was in force.

Same, limit – s. 42.2(8)

Subsection 42.2(8) was repealed effective January 1, 2019 as a result of the Making Ontario Open for Business Act, 2018. This provision is no longer in force. The discussion of this provision is being maintained for use in situations that arose when it was in force.

These provisions, read together, provide that if a collective agreement that that is in effect on April 1, 2018 contains a provision that permits differences in the rate of pay between employees of a client and an assignment employee, the provision of the collective agreement will prevail even if it conflicts with the ESA. However, the conflicting provisions will cease to prevail on the the earlier of the date the collective agreement expires or January 1, 2020.

Updated: June 15, 2022

Published: July 19, 2018