What are “changed circumstances”?

The Act does not specifically define “changed circumstances”, however, this term can be used to describe a number of scenarios, including the addition or deletion of a large number of jobs, restructuring, the acquisition or selling of divisions, or accumulated changes over time that could not be dealt with through regular maintenance. To apply the provision of “changed circumstances” as a basis for amending a pay equity plan, the Tribunal has stated in Hilton Works v. MacDonald, 1993 CanLII 5422 (ON PEHT): “The plain language of sections 14.1 and 14.2 requires the Tribunal to look not simply at the fact of changed circumstances, but at the impact of the changed circumstances on the appropriateness of the plan.”

The decision as to whether a deemed approved plan is no longer appropriate for the establishment or the bargaining unit because of changed circumstances depends solely on the facts of each case and the degree of change.

i. What can be amended?

Where a deemed approved plan is found to be inappropriate because of changed circumstances, the employer or the employer and the union cannot make changes to the gender neutral comparison system that was in the original plan.

ii. What is the process for amending a deemed approved plan due to changed circumstances?

In unionized settings, either the employer or the union can notify the other party that it considers the plan to be no longer appropriate for the bargaining unit because of changed circumstances [14.1]. If the parties are unable to agree, either party may file an application with the Pay Equity Office. Giving notice under [14.1] does not automatically mean that the plan is no longer appropriate. A Review Officer investigating such a matter will first require proof that the plan is no longer appropriate for the bargaining unit before taking further steps.

In situations where there has been a change in circumstance but the change is such that the pay equity plan is still applicable for comparing job classes and identifying pay equity gaps in the establishment, the Review Officer will terminate his/her involvement in the matter.

Where a Review Officer finds that the plan is no longer appropriate for the bargaining unit, he/she may order that the parties negotiate the required amendments or may make such other orders as may be necessary to amend the plan. A plan that has been amended either by agreement or ordered becomes deemed approved once signed or ordered.

In non-unionized settings, an employer may amend a deemed approved plan where in the employer’s view the plan is no longer appropriate for the establishment. The employer is required to post the amended plan and the employees will have an objection period that mirrors the objection period that were available when the original plan was developed. The amended plan becomes deemed approved once all objection periods have expired.

In either setting, an existing deemed approved pay equity plan is binding on the parties it covers [13. (9)] until such time that an amended plan becomes deemed approved.

It must be noted that if the employer is still in the process of achieving pay equity and the plan is amended because of changed circumstances, the amount of a pay equity adjustment for any female job class cannot be less than it was under the plan before it was amended [14.1 (7), 14.2 (3)].

iii. Sale of Business

The Act outlines what can occur when a Part II employer sells a business [13.1]. A “sale of business” includes any form of transfer or disposition, including a lease or a sale of all, part or parts of a business.

iv. What happens to pay equity plans as a result of a sale of business?

When a sale occurs, pay equity plans that are in effect may no longer be appropriate for either the seller or the purchaser due to changes in the composition of their workforces that make the existing plan(s) incapable of valuing and comparing the female job classes in the new organization(s). In the case of Child’s Place v. Fitzpatrick, 2002 CanLII 49459 (ON PEHT) the Tribunal stated:

“…if the sale of business renders either the purchaser or the seller’s plan no longer appropriate then each is required to prepare a new plan. No doubt the need for new plans is more likely in a sale of part of a business where the seller’s business contracts and the purchaser’s expands, with the attendant loss or gain of employees. But in any event, a consideration of whether a new plan is required only occurs after the sale of business when the consequences of that transaction are apparent to both the vendor and purchaser (emphasis added).”

If a new plan is required in non-unionized settings, the employer prepares it. In unionized settings, the bargaining agent and employer negotiate and agree to a new plan for its bargaining unit. In both cases, the new plan is subject to the “deemed approved” as previously described.

v. Who is responsible for paying adjustments under the pay equity plan?

Although a vendor would be normally responsible for the adjustments owing under its pay equity plan, a purchaser may be liable. The Tribunal commented on the potential liability of a purchaser in Child’s Place v. Fitzpatrick, 2002 CanLII 49459 (ON PEHT) by stating:

“…it is possible to read section 13.1 as placing an obligation on a purchaser to make payments under pay equity plans that the seller failed to make in a timely way. But it is difficult to read section 13.1 as absolving a seller of liability for outstanding adjustments at the point a sale is made. Indeed, it is possible to read section 13.1 in a manner that places joint and severable liability on both the seller and the purchaser.”

If this issue arises in the course of an investigation of a complaint, a Review Officer will likely ask for copies of the pay equity plan, proof of adjustments paid, and the purchase and sale documents to determine liability. Purchasers should therefore be mindful of potential pay equity liabilities and obtain the necessary advice to protect themselves from assuming liability for payment of adjustments that are owed by the vendor.