Discovering that a coworker earns more money than you can be frustrating, especially when you appear to be doing the same job. You may wonder whether your employer is legally allowed to pay two employees differently for substantially the same work. The answer depends on why the difference exists.
Ontario employers may pay employees differently based on factors such as seniority, merit, productivity, experience or other lawful considerations. However, Ontario’s Employment Standards Act, 2000 prohibits an employer from paying an employee of one sex less than an employee of another sex when they perform substantially the same kind of work in the same establishment, their work requires substantially the same skill, effort and responsibility, and they work under similar conditions, subject to limited exceptions.
Employees are also protected from discrimination under Ontario’s Human Rights Code. If a difference in pay or another employment decision is connected to a protected ground, an employee may have legal rights and remedies available to them.
For more information about discrimination and unequal treatment, read our guide to human rights in the workplace.
Can Two Employees Doing the Same Job Be Paid Differently?
Two employees who have the same job title or perform similar duties are not automatically entitled to identical compensation.
A difference in pay may be lawful when it is based on factors such as:
- Seniority;
- A merit-based compensation system;
- A system that measures earnings by quantity or quality of production; or
- Another factor other than sex.
However, a difference in pay may raise legal concerns when it is based on sex or another characteristic protected under the Ontario Human Rights Code.
A significant reduction in an employee’s compensation may also amount to a substantial change in the employment relationship. Depending on the circumstances, this could potentially result in a constructive dismissal.
Equal Pay for Equal Work Under the Employment Standards Act
Most provincially regulated employees in Ontario are covered by the Employment Standards Act, 2000 (the “ESA”). The ESA establishes minimum employment standards that employers and employees generally cannot contract out of or waive.
Section 42 of the ESA addresses equal pay for equal work. It prohibits an employer from paying an employee of one sex at a lower rate than an employee of another sex when:
- They perform substantially the same kind of work in the same establishment;
- The performance of their work requires substantially the same skill, effort and responsibility; and
- Their work is performed under similar working conditions.
The ESA permits differences in pay when they are based on:
- A seniority system;
- A merit system;
- A system that measures earnings by quantity or quality of production; or
- Any other factor other than sex.
An employer also cannot reduce another employee’s rate of pay to comply with the equal-pay requirements.
Employees who ask their employer about their ESA rights may also be protected from retaliation. Learn more about reprisal and wrongful dismissal and what may happen when an employer penalizes an employee for asserting a workplace right.
The Ontario Human Rights Code and Workplace Discrimination
Ontario employees also have protections under the Human Rights Code (the “Code”).
The Code provides employees with the right to equal treatment in employment without discrimination because of protected grounds that include:
- Race;
- Ancestry;
- Place of origin;
- Colour;
- Ethnic origin;
- Citizenship;
- Creed;
- Sex;
- Sexual orientation;
- Gender identity;
- Gender expression;
- Age;
- Record of offences;
- Marital status;
- Family status; and
- Disability.
The right to equal treatment applies to compensation and other aspects of the employment relationship, including hiring, promotions, workplace responsibilities, discipline and termination.
If a difference in pay is connected to a protected ground, the employee may be able to seek lost wages and compensation for injury to dignity, feelings and self-respect.
Read more about human rights and discrimination in the workplace.
Equal Pay Is Not the Same as Pay Equity
Although the terms are sometimes used interchangeably, equal pay for equal work and pay equity are different legal concepts.
Equal pay for equal work generally concerns employees of different sexes who perform substantially the same work. Pay equity addresses systemic differences in compensation between predominantly female and predominantly male job classes performing work of equal or comparable value.
Ontario’s Pay Equity Act generally requires private-sector employers with 10 or more employees and public-sector employers to establish and maintain compensation practices that provide pay equity.
The Ontario Pay Equity Commission administers and enforces the Pay Equity Act. Employees may contact the Pay Equity Office or submit an application when they believe an employer has failed to comply with its obligations.
What Should I Do If My Coworker Makes More Than Me?
Finding out that a coworker earns more than you does not automatically mean your employer has broken the law. Before drawing a conclusion, consider whether there are lawful reasons for the difference, such as seniority, experience, performance or different responsibilities.
You may wish to document:
- Your job title and responsibilities;
- The work performed by the employee receiving higher pay;
- Your respective experience, qualifications and seniority;
- How compensation decisions are made;
- Statements made by your employer about the difference in pay; and
- Any treatment that may suggest discrimination or retaliation.
Employees should be cautious about resigning before obtaining legal advice. Depending on the circumstances, a substantial reduction in compensation or other major change to employment may raise issues relating to constructive dismissal in Ontario.
If your employer punishes, threatens or dismisses you after you ask about your employment rights, you may also wish to learn more about reprisal in the workplace.
Federally Regulated Employees
Employees working in federally regulated industries are covered by federal employment legislation rather than Ontario’s Employment Standards Act.
Federally regulated workplaces generally include banks, telecommunications companies, airlines, railways, interprovincial transportation companies and certain federal Crown corporations. The Government of Canada provides a more complete list of federally regulated industries and workplaces.
For an overview of the rights and entitlements that may apply to these workers, read our guide for Canada Labour Code employees.
The Canada Labour Code and Canadian Human Rights Act
Federally regulated employees may have protections under the Canada Labour Code and the Canadian Human Rights Act.
Section 11 of the Canadian Human Rights Act states that it is a discriminatory practice for an employer to establish or maintain differences in wages between male and female employees working in the same establishment who perform work of equal value.
The assessment of whether work is of equal value may include the skill, effort and responsibility required to perform the work and the conditions under which the work is performed.
The Federal Pay Equity Act
The federal Pay Equity Act came into force on August 31, 2021. It establishes a proactive pay equity system for federally regulated workplaces with 10 or more employees.
Covered employers must examine their compensation practices, identify predominantly female and predominantly male job classes, determine whether compensation gaps exist and take steps to address those gaps. Employers must also review and update their pay equity plans at least every five years.
We previously discussed the legislation in Preparing for Federal Pay Equity.
In Summary
If you do the same job as a coworker but earn less money, the difference in compensation is not automatically unlawful. Ontario employers may pay employees differently based on lawful considerations such as seniority, merit, productivity, experience or different responsibilities.
However, the Employment Standards Act, 2000, the Ontario Human Rights Code and the Pay Equity Act provide important protections against certain forms of unequal pay and workplace discrimination.
If you believe you are being paid less because of your sex or another protected characteristic, it is important to understand which law applies and what legal options may be available.
If you have questions about unequal pay, workplace discrimination or your employment rights, please contact Monkhouse Law Employment Lawyers for a free 30-minute phone consultation.