841986 Ontario Limited o/a Helping Hands Daycare v. Group of Employees, 2006 CanLII 80917

2387-05-PE 841986 Ontario Limited o/a Helping Hands Daycare. Applicant v. Group of Employees, Respondent

Before: Patricia E. DeGuire, Vice-Chair, Margaret Kvetan and Pauline R. Seville, Members

Appearance: Russell I. Alexander, Counsel for Helping Hands Daycare 841986 Ontario Ltd.

Cite as: Helping Hands Daycare (No. 2) (11 October, 2006), 2387-05 (P.E.H.T.)

DECISION OF THE TRIBUNAL, OCTOBER 11, 2006

I. INTRODUCTION

In an Order dated July 15, 2005, a Review Officer directed the Applicant Helping Hands Daycare 841986 Ontario Ltd. (the “Employer”), among other things, to prepare and post a pay equity plan retroactive to January 1, 1994, using the proxy method of comparison set out in Part III.2 of the Pay Equity Act, R.S.O. 1990, c. P.7 (“the Act”). The Order is reproduced below verbatim:
Helping Hands Daycare is ordered to prepare a pay equity plan for the workplace, using the proxy method of comparison as described in section III.2 of the Act;
Helping Hands Daycare is ordered to post the pay equity plan in its workplaces, within thirty days (30) of the date of this Order;
Helping Hands Daycare is ordered to provide a copy of the plan, once completed, to me at: Pay Equity Commission, 400 University Avenue, 11th Floor, Toronto, Ontario M7A 1T7 Attn: Margaret Corion, Senior Review Officer;
Helping Hands Daycare is ordered to provide a copy of the plan by mail to all former employees, within thirty (30) days of the date this Order is issued;
Helping Hands Daycare is ordered to pay any adjustments required under the pay equity plan, retroactive to January 1, 1994, within 120 days of the posting of the plan, having regard to the provisions in respect of minimum and maximum adjustments set out in section 13 of the Act;
Helping Hands Daycare is order to pay interest on all monies owing, calculated in accordance with the principles set out at paragraph 67 of Peterborough (Clow) No. 3), (1996), 7 P.E.R. 33;
Following from point 5, interest should be calculated in the following manner as set out in Pay Equity Hearings Tribunal decision: Royal Crest Lifecare Group (No. 5) (November 18, 2002), at paragraph #17:

After calculating the amount owed to each employee or former employee, the amount is divided in half and the rate of interest as prescribed in section 127 of the Courts of Justice Act, R.S.O. 1990, cC43 is to be applied from January 1, 1994, the date the pay equity adjustments should have been implemented. This is a rough and ready interest calculation, taking into account that the total amount would not have been received at once. The Ontario Gazette prescribes the rate for the first quarter of 1994 as 4.3%. Consequently, the Employer must pay interest at the rate of 4.3%, calculated on half of the amount owed to each person from January 1, 1994.

The Employer objects to the Order. It brings this Application and asks the Pay Equity Hearings Tribunal (the “Tribunal”) to revoke the Order. Further, it asks the Tribunal to find that it has met the requirements of the Act and has complied with the Order.

II. Background

In its Application for a hearing before the Tribunal, the Employer lists a series of communications it had made with the Tribunal. As the Tribunal states in its interim decision, it appears that the Employer was seeking advice from the Tribunal about how to comply with the Act. (Helping Hands Daycare, (November 18, 2005) (P.E.H.T.), unreported at para. 3). In that decision, the Tribunal directed the Employer to advise it on specific issues, and to provide specified supporting documents. The Tribunal’s direction is reproduced below, verbatim:

(a) When did the Employer prepare and post a pay equity plan? Please provide a copy of the plan.

(b) Were there any female job classes for which it was not possible to determine whether pay equity existed?

(c) If the Employer contends that it has achieved pay equity, when did that occur? Please provide copies of any documents that evidence such achievement.

The Employer’s response to the above was sent to the Tribunal under date of November 28, 2005, and was entered into evidence as Exhibit 5, by its only witness Ms Eickmeier. The relevant parts are reproduced below verbatim:
A plan was posted in Oct 1996, after a payout to all staff (covering 94, 95 & 96 was paid) Jack Hughes reviewed the plan and approved it. (Please see plan 1) Margaret Corion told me to create a new plan, which I did (Please see plan 2)
There were no female job classes for which it was not possible to determine whether pay equity existed.
Pay equity has not been achieved. A pay equity plan has been in place since 1996 and payroll has increased annually by a minimum of 1% (as per jack Hughes instructions)
The hearing on the merits was held on June 26, 2006. Subsequently, the Tribunal received letters from Mr. Russell Alexander, counsel for the Employer, dated June 26, 2006 with attachments, and September 5, 2006. The Employer had closed its case at the end of the hearing on June 26, 2006, and the Panel did not direct him to submit any additional documents to it. Therefore, the attachments to his June 26, 2006 letter will not be used in the Tribunal's decision.

III. The Issue

The narrow issue here is whether the Applicant used the proxy method of comparison under Part III.2 of the Act to compose the Pay Equity Plan it has submitted, and whether that Plan meets the requirements set out in the Act.

IV. Decision

The Applicant’s Plan does not meet the requirements of the Act. The Order is confirmed.

V. The Evidence

Ms Nancy Linda Eickmeier was the Employer’s only witness.
Ms Eickmeier purchased Helping Hands Daycare in 1989, and became its Executive Director. There were two locations in this establishment: the original location at 1822 Whites Road, Pickering and 31 Brennan Road in Ajax. In May 2001 the original location was changed to 734 Kingston Road, Pickering.
The Employer tried to put a pay equity plan into place, using the proxy method, after meeting with Mr. Jack Hughes, who used to work for the Pay Equity Office. In preparing the proxy pay equity plan, the Employer chose the Region of Durham Social Services (“Durham”) as the potential proxy employer. It determined that there were three separate job classes in its own establishment, namely, Supervisor, Early Childhood Educators (“ECE”), and Assistant. With the information gleaned from Durham, the Employer prepared the plan.
The witness was clear that the document at Exhibit 1, Tab 2, dated “Oct 96” is the plan she prepared and posted, in October 1996 after a payout to all staff. She claims that Jack Hughes reviewed the plan and approved it. That document is reproduced below, verbatim:

A Pay Equity plan has been put into place at Helping Hands Daycare to ensure that all employees are paid in accordance to the Pay Equity Commission.

All staff will have their salaries increased by a minimum of 1% annually, every January 1st. This increase will continue until Pay Equity has been achieved.

Your job classes have been compared to The Region of Durham Social Services

Helping Hands Reg. of durham

Supervisor $12.06 $22.71
ECE $ 9.75 $14.50
Assistant $ 6.85 min wage

This plan will be posted for the next 90 days. If anyone has any questions or disputes, please let me know or contact the Pay Equity Commission @ 1-800-387-8813.

Thank you

Nancy Eickmeier

Executive Director

Helping Hands Daycare

The salaries indicated in Exhibit 1, Tab 2, beginning at page. 3 represent the money the Employer paid to employees for the periods January 1, 1994 to December 1994; January 1, 1995 to December 1995; and January 1, 1996 to October 1996. Those figures, she states, represent “1% of their earnings”. The documentary evidence at Tab 2 on which the witness relies consists of a series of numbers that she claims were the sources of her computation toward determining the pay equity adjustment she had to make and that she had complied with the Act. She had computed those figures by using the employees’ wages per hour and the hours worked.
The witness states that she had posted the plan, i.e., only the one-page document reproduced at paragraph 11 above, and has not made any adjustments to it since. The witness entered several documents into evidence including: (a) Tab 3, “paper work showing staff job descriptions”; (b) Tab 4, a completed “Pay Equity Commission:: The Space Toy Co. Case Study:: Job Evaluation – Create a Weighting Formula”; (c) Tab 5, copies of a “log book”, that she states is kept in compliance with the Ministry of Community and Social Services (”MCSS”) requirement, which shows that “pay equity was paid out for 94-96 on October 24, 1996”. She believes that MCSS requires that staff must read and initial the logbook every day as proof that they read the logbook.
She states that she continued to make payouts and was not required to make any changes or take any further action until she was contacted by a review officer about two years ago. That review officer asked her to create a new plan, and had requested the job descriptions of all the job classes, and the weighting formulae of the employees in those job classes; she has complied. In her view, she has complied with the Act and had not heard from the Pay Equity Office until the Employer received the Order. Upon receipt of the Order, the Employer contacted the Pay Equity Commission and asked what steps it should take to comply with the Act.
In response to that communication, the Tribunal issued its November 18, 2005 decision, referred to above.
The witness claims there are no female job classes for which it was not possible for the Employer to determine whether pay equity existed. She admits that the Employer has not achieved pay equity, but denied the Employer ever said it had done so. She asserts that a pay equity plan has been in place since 1996, and payroll has been increased annually by a minimum of “1% of the earnings”, which was “divided among the staff” according to Jack Hughes’ instructions. (See Exhibit 5 at paragraph 4 above).
In his submissions, the Employer’s counsel states that the Employer had complied with the “letter and the spirit” of the Act and should be commended for cooperating especially because it is a small business.
He submits that subsection 21.18(2) of the Act lists 12 criteria, which must be satisfied towards a complete proxy pay equity plan. The document, Exhibit 1, Tab 2 has satisfied criteria 1 to 4 and 12.

19 Further, counsel submits that the documents at Tabs 3 to 5 satisfy criteria 6 to 9, and criteria 5, 10 and 11 do not apply because of the nature of the business and there are only three job classes in the establishment, which are dealt with in the original plan. He argues that the Employer has satisfied and continues to satisfy the Order, and although pay equity has not been achieved, efforts are being made to achieve it.

VI. Analysis

In its Helping Hands Daycare (November 18, 2005) (P.E.H.T.) decision at paragraph 10, the Tribunal questions the direction to prepare a proxy pay equity plan in 1996, because it seems the direction to do so was during the period when the relevant legislative provisions were not in effect. It is apposite for the Tribunal to state that in 1996 the Legislature repealed the proxy provisions of the Act (Savings and Restructuring Act, 1996, Schedule J, amending the Pay Equity Act, R S.O. 1990, c. P.7, 1996, c.1, s.1.). The Service Employees International Union (“SEIU”) brought a constitutional application challenging the validity of the repeal on the ground that it abridged the rights and freedom protected under sections 15 and 28 of the Charter of Rights and Freedoms. The court held in September 1997 that the act to repeal the proxy provisions was unconstitutional. (SEIU, Local 201 v. Ontario (Attorney-General) (1997), 1997 CanLII 12286 (ON CTGD), 35 O.R. (3d) 508).
The effect of the court's decision is that the proxy provisions were reinstated, and thus, there has not been a gap in the legislation with respect to Part III.2 of the Act. However, to date the Legislature has not amended the Act to reverse the repealed sections and so they have not been reprinted in the official version of the Act. Thus, the Tribunal concludes that it was proper to direct the Employer to prepare and post a pay equity plan in 1996.
The Employer does not challenge the assertion that it is a public sector employer. It operates day nurseries, which are licensed under the Day Nurseries Act, R.S.O. 1990, c. D.2. Nor does the Employer challenge the assertion that it is a “seeking” Employer, i.e., an employer in respect of whom a review officer has issued an order under subsection 21.12(2) of the Act. Thus, the Tribunal concludes that the Employer falls within the purview of Part III.2 of the Act and ought to prepare and post a pay equity plan using the Proxy method of comparison.
The proxy method of comparison requires a seeking employer to examine job and salary information about similar female job classes from the potential proxy employer to achieve pay equity for its female job classes when ordered to do so by a review officer. The female job classes from the "seeking" employer are compared to the proxy female job classes using a proportional value method of comparison to determine the amount of the pay equity adjustments required to achieve pay equity: Brampton Public Library Board (No. 2) (1994), 5 P.E.R. 51, at para. 15.
The Act sets out processes a seeking employer must follow in its requirement to prepare and post a pay equity plan using the proxy comparison method. A seeking employer must identify all the female job classes; select a potential proxy employer; evaluate the female job classes from the potential proxy employer; develop a job rate line for proxy job classes; determine the pay equity adjustments for the female job class; and finally prepare and post the pay equity plan. Not only must an employer follow every step, it must do so sequentially following the specific ways to do each step. The plan must include specific information defined by the Act. A seeking employer must demonstrate that it has followed these processes.
The Employer identifies three job classes: Supervisor, ECE and Assistant. There is no evidence before the Tribunal on whether the Employer has identified all the key female job classes in its establishments.
There is no dispute about whether the Region of Durham Social Services is the appropriate “potential proxy employer”. However, the Tribunal notes that a municipality operating a daycare facility is a proper potential proxy employer according to Ontario Regulation 396/93, Schedule 1, which was made under of the Act. Having made that observation, the Tribunal is mindful that the group of employees, who are the respondents in this matter, are non-union employees, and accordingly, the Employer is entitled to select a potential proxy employer. Thus, the Tribunal concludes that this step is consistent with the stipulated process.
In Exhibit 1, Tab 2, the document that the Employer purports to be its pay equity plan, there are numbers, which it submits are the comparative salary information obtained from Durham. There is no evidence before the Tribunal that the Employer followed the proper steps to obtain that information or that the information in the document is the total salary or wages plus the cost of benefits as a percentage of the total amount of all wages and salaries. Nor is there any evidence that the wages indicated in paragraph 11 above are wages for the comparator female job classes within Durham.
The Employer has not presented any evidence to the Tribunal to indicate how it developed its gender-neutral comparison system to determine the job values from Durham, or indeed what that system was. Without a properly developed gender-neutral comparison system, an employer is unable to do a proper comparison between its job rates and values and those of its potential proxy employer. Thus, any attempt to identify the proper job rates for the proxy female job classes is suspect. Notably, pay equity is achieved only when the job rates for the female job classes in the employer’s establishment reach the job rate line at the relevant value. Thus, the Tribunal concludes that the Employer has failed to follow this step. The Employer has not demonstrated how it had arrived at its pay equity adjustments for its female job classes.
The Tribunal concludes that the document at paragraph 11 above, which the Employer purports to be a pay equity plan, does not meet the requirements set out subsection 21(18)(2) of the Act. Further, the Tribunal cannot accept the Employer’s counsel submissions that the documents at Exhibit 1, Tabs 3 to 5 meet the requirements of criteria 6 to 9; nor does the Tribunal accept the argument that the nature of the business renders criteria 5, 10 and 11 inoperative.
Subsections 21(18()(1) makes it mandatory that a proxy pay equity plan contains specific information. All the criteria must be met; none is subject to any qualification. Subsection 21(18()(1) and (2) are reproduced below:

21.18(1) Every seeking employer shall prepare a pay equity plan to provide for pay equity using the proxy method of comparison:

(2) The plan must do the following:

Identify the establishment to which the plan applies.
Identify the key female job classes of the seeking employer.
Identify the proxy employer and the proxy establishment.
Identify the female job classes in the proxy establishment with which the key female job classes of the seeking employer were compared and set out their pay equity job rates.
Identify the female job classes in the seeking employer that are not key female job classes and that were compared with the key female job classes.
Describe the gender-neutral comparison system used for the purpose of making the comparisons.
Describe the methodology used for the calculations required by the comparisons.
Set out the value of the work performed in each job class that was compared with another job class.
Set out the results of the comparisons.
Identify all positions that are excluded in determining whether a job class is a female job class or a male job class and that are not to be included in any compensation adjustments under the plan by virtue of subsection 8(3), and set out the reasons for relying on that subsection.
With respect to all female job classes for which pay equity does not exist according to the comparisons, indicate how the compensation in those job classes will be adjusted to achieve pay equity.
Set out the date on which the first adjustments in compensation will be made under the plan, which date shall be not later than one year after this section comes into force.
The Tribunal concludes that the document the Employer purports to be a pay equity plan is not a pay equity plan.
The Act sets out a mandatory scheme for making pay equity adjustments, and to ensure that pay equity is achieved. The processes mandated in the Act, are prerequisites to achieve the objective of the Act. For instance, if the potential proxy employer, the comparator, the salary information, and the gender-neutral comparison system were improper, inevitably the results, which enable pay equity to be achieved or enable the Employer to make the proper pay equity adjustments, would be skewed.
The Tribunal does not dispute that the Employer has paid out monies to its employees. However, having failed to follow the processes and to compose a proper pay equity plan as stipulated by the Act, the Tribunal is unable to determine whether those monies are for pay equity adjustments or merely wage increases. In her evidence, at different times, the witness states that she had based the payout on “1% of wages” or “1% of their earnings gross payroll at that time”, or “1% of payroll”. The 1% had to be divided among staff. There is no evidence how that 1% was divided.
An Employer is required to begin to pay these adjustments on January 1, 1994. If an Employer, however, began to make those payments after January 1, 1994, it must make the payments retroactive: that is, from January 1, 1994 to this date.
The Act requires that each year, January 1st, an Employer must give pay equity adjustments to all female job classes that have not achieved pay equity. It must spend at least 1% of its total previous year’s payroll on pay equity adjustments, or the full amount, if said amount, which is required to achieve pay equity, is less than 1% of the previous year’s payroll. Salary or wage increases are then paid on top of the pay equity adjustments. Accordingly, the target rate for pay equity for the job class is increased by the said amount of the salary or wage increase.
When distributing the 1% of the previous year’s payroll, the female job classes in the plan with the lowest job rate must receive a greater adjustment than the other job classes in the same plan until pay equity is achieved, or until these job classes are paid as much as the next lowest female job class.
The onus is on the Employer to show that the increases given to the employees in the female job classes were pay equity adjustments and not merely salary increases. The Tribunal is not satisfied that the Employer has met this onus.
Accordingly, the Tribunal must conclude that the Employer has failed to prepare and post a pay equity plan. The Tribunal finds that the Employer has not complied with the Act. Accordingly, the Order is confirmed.

VII. disposition

According to clause 25(2)(g) of the Act, the Tribunal directs the Employer to take the following actions.

(1) The Employer must prepare, post and implement a pay equity plan effective from January 1, 1994, using the proxy method of comparison as described in subsection 21(18)(2), of Part III.2 of the Act. The job rates that must be used in the plan are those, which were in effect as at January 1, 1994.

(2) The Employer must post the said plan within 30 days of the date of this Decision.

(3) The Employer must forward a copy of the plan to each former employee, by registered mail to his or her last known address, within 30 days of this Decision.

(4) The Employer must forward a copy of the pay equity plan to the attention of the Review Officer, complete and return a certificate of posting, within 30 days of this Decision.

(5) The Employer must pay any pay equity adjustments required under the pay equity plan retroactive to January 1, 1994, within 120 days of the posting of the plan, consistent with the minimum and maximum adjustment provisions set out in section 13 of the Act.

(6) The Employer must provide a copy of said calculation to the Review Officer within 30 (thirty) days of this Decision.

(7) The Employer must pay interest on all monies owing to employees. The interest should be calculated according to the principles set out at paragraph 67 of Peterborough (Clow) (No. 3) (1996), 7 P.E.R. 33.

Interest should be calculated in the following manner as set out in Pay Equity Hearings Tribunal decision: Royal Crest Lifecare Group (No. 5) (November 18, 2002), at paragraph #17:

Dated at Toronto, Ontario this 11th day of October, 2006.

“Patricia E. DeGuire”

____________________________________

Patricia E. DeGuire, Vice-Chair

“Margaret Kvetan”

_____________________________________

Margaret Kvetan, Member

“Pauline R. Seville”

_____________________________________

Pauline R. Seville, Member