The #MeToo and Times Up movements have led to significant cultural shifts and a collective call to action to end sexual harassment and related forms of exploitation. Since many of the high profile allegations involved abuse of power and quid pro quo demands in the context of employment relationships, the impact on employers has been profound.

While these movements originated in the US, gender-based discrimination and harassment have long been persistent issues in Canadian workplaces as well. According to a recent Statistics Canada study, 19% of women and 13% of men reported that they had experienced harassment in their workplace in the past year.[1] Canadian women are also subject to a significant wage gap: for every $1 earned by men, Canadian women earn 87 cents or less.[2] Women also tend to be underrepresented in leadership positions, especially in the private sector.[3]

Sexual harassment and the gender pay gap are therefore not “new” challenges facing Canadian employers. However, a changing social climate has made it imperative that employers pay close attention to these issues. In the US, several employers are facing class or collective actions alleging they condoned, or were wilfully blind to, harassment and gender pay gaps in their workplaces. Allegations against an increasing number of employers, from technology companies to professional services firms, continue to make headlines. It may only be a matter of time before Canadian employers are confronted with a surge in claims and some are already facing significant claims.

US Disputes: Harassment & Gender Discrimination Claims

In the US, an increased number of employees are stepping forward to bring workplace sexual harassment claims – referred to as the “Weinstein effect” – either through claims filed with the Equal Employment Opportunity Commission (“EEOC”) or by way of lawsuits brought in state and federal court. This surge underscores the importance of robust training programs, as well as effective anti-retaliation and whistleblower policies and practices.

In addition to concerns of workplace harassment, US employers are also grappling with an intense focus on equal pay and pay equity. Professional services firms and several high profile technology companies, in particular, have been the target of a wave of gender discrimination class actions alleging discriminatory pay practices. The typical claim is that the employer discriminates by paying women less than men in similar positions while also denying them career progression opportunities and promotions, for example:

• Claims against technology multinationals (2018)
  • The plaintiffs allege that women are paid less than men doing similar jobs and are denied advancement opportunities.
  • In an unrelated action, two former employees allege that the employer employs far fewer women than men, and pays women less than their male counterparts.
• Claim against retail industry leader (2017)
  • In addition to alleging that the employer’s pay and promotion practices are discriminatory against female employees, the plaintiffs allege that managers do not use job performance or experience to set wages and that men often receive higher performance ratings and are paid more.
• Claim against a firm in “BigLaw” market (2018)
  • The plaintiff is a former hiring partner who alleges the law firm acts as a “fraternity”, where female lawyers are paid less than their male counterparts. The complaint alleges that the firm helps male associates rise through the firm, while female lawyers are treated as “second class citizens.”

It remains to be seen if any of the recent lawsuits proceed through discovery to the class certification stage. However, even without making it past class certification, these actions can cause significant reputational damage, in addition to forcing the company to spend substantial litigation dollars to protect sensitive compensation data from becoming public.

To mitigate potential liability, many US companies are engaging counsel to undertake proactive gender pay audits to identify and rectify any unexplainable pay disparities. This will become increasingly important since the EEOC may begin collecting compensation data (in addition to data collected regarding race and gender) following a federal court decision last week. On March 4, 2019, the District of Columbia Federal Court ruled that the Office of Management and Budget improperly issued a stay on the Obama-era regulation requiring that employers report W-2 wage information in their annual EEO-1 Report. It remains to be seen how the agency will respond.

The Canadian Legal Context

Gender-Based Discrimination and Sexual Harassment

In Canada, employers are subject to human rights legislation that prohibits discrimination in employment based on sex and other enumerated grounds. Also, in certain jurisdictions, sexual harassment in the workplace is specifically prohibited under applicable legislation. For example, section 7(2) of Ontario’s Human Rights Code  (“Code”) provides:

“Every person who is an employee has a right to freedom from harassment in the workplace because of sex, sexual orientation, gender identity or gender expression by his or her employer or agent of the employer or by another employer.”

Also, Ontario employers have a legal duty to institute a workplace sexual harassment and violence program under the Occupational Health and Safety Act  (“OHSA”). In 2016, the OHSA was amended under Bill 132, Sexual Violence and Harassment Action Plan Act, to expand employers’ obligations when it comes to combatting sexual harassment and violence in the workplace and protecting employees from such conduct. Employers must:

1. Prepare written workplace harassment and violence policies, which employers must post at a conspicuous place at the workplace. These policies must be reviewed by the employer at least annually;
2. Develop and maintain a program to implement the workplace violence policy, which must include measures and procedures to control the identified risks, as well as reporting and investigation mechanisms; and
3. Develop and maintain a program to implement the workplace harassment policy, which must protect a worker by providing for an investigation to be conducted in response to incidents and complaints of workplace harassment and to inform the implicated parties of the results of the investigation in writing. The employer must review their program at least annually.

In Quebec, employment standards legislation include provisions regarding “psychological harassment”. Psychological harassment encompasses harm to an employee’s dignity and psychological or physical integrity, and, as a result of recent legislative amendments, expressly includes sexual harassment.

Even in jurisdictions that do not have specific legislation regarding workplace violence and harassment, such conduct can lead to significant employer liability. Further, in certain cases, employers may be vicariously liable for discrimination perpetrated by their employees, such as where the discrimination creates a “poisoned work environment.” In Merrifield v The Attorney General of Canada, 2017 ONSC 1333, the Ontario Superior Court of Justice recognized harassment as a valid cause of action.

Gender Pay Gap

All jurisdictions in Canada require employers to pay men and women “equal pay for equal or similar work”; that is, work that is performed in the same establishment, requiring substantially the same skill, effort, and responsibility and performed under similar working conditions. Exceptions, which vary by province, can include situations where an employer’s pay rate is based on a seniority system, a merit system, a system that measures earnings by quantity or quality of production, or factors other than sex.

Also, pay equity laws require “equal pay for work of equal value”, even if the work is entirely different. These laws seek to redress systemic discrimination in compensation for work performed by employees in predominantly female job classes. Pay equity laws apply to private sector employers in Ontario and Québec with 10 or more employees and to federally regulated employers. They also apply to public sector employers in most jurisdictions.

The federal government recently introduced a new proactive pay equity regime. Although the implementing legislation received Royal Assent in December 2018, the federal government has not determined an effective date. The new Pay Equity Act will require federal public and private sector employers with 10 or more employees to establish pay equity plans within set timeframes. In establishing a pay equity plan, employers will be required to identify and rectify differences in compensation between predominantly female and predominantly male job classes for which the work performed is of equal value. Effectively, this will require a pay audit of all job classes. Federally regulated employers are currently subject to pay equity requirements under the Canadian Human Rights Act, although this is a complaints-based model.

Ontario has had pay equity legislation in force since 1987. Under the province’s Pay Equity Act, public sector and large private sector employers (i.e., organizations that employ 100 or more employees) must meet certain minimum requirements necessitating that their compensation practices provide pay equity for all employees in female job classes. “Female job classes” are generally job classes where 60% or more of the members are female. Specifically, such employers are required to:

1. Compare job classes: Employers must using a “gender-neutral comparison system”, compare female job classes against male job classes to determine whether pay equity exists for each female job class.
2. Develop a pay equity plan: To correct any pay equity gaps; employers must develop a pay equity plan describing the gender-neutral comparison system, outlining the results of the comparisons, and detailing how the employer will correct any gaps such that they can achieve pay equity in the workplace.

In February 2019, the Ontario government initiated a public consultation on pay transparency reporting requirements. This step followed the government’s delay of the coming into force of the Pay Transparency Act, 2018 (“PTA”). The previous government introduced the PTA and was scheduled to come into force on January 1, 2019. The current government indicated that “[c]omplying with the Act’s current reporting requirements would have significantly increased costs for businesses and affected some sectors more than others.” Among other requirements, the PTA would have required larger employers to track and annually report compensation gaps based on gender, post a salary rate or range in job advertisements, and refrain from seeking past compensation information from candidates.

Recent Canadian Gender-Based Disputes

Although gender-based class actions have a longer history in the US, Canadian employers are confronting similar claims. The following class actions have been commenced recently against Canadian employers in the public and private sectors:

In Canada, there has been at least one instance in which employees sought certification of a class action for gender pay discrimination. In Franklin v University of Toronto, (2001) 56 OR (3d) 698, the plaintiffs were retired female professors who brought a class action against the University of Toronto alleging systemic salary discrimination and corresponding unjust enrichment of the university. The Ontario Superior Court of Justice dismissed the certification motion, finding that there were significant evidentiary obstacles. The Court found that even if the plaintiffs could establish evidence of systemic salary discrimination, each plaintiff would still be required to establish that they suffered salary discrimination.

Evidentiary Barriers to Class Actions

In Canada, plaintiffs can start a class action in any province. However, Canada does not have a “multidistrict litigation” system to consolidate class action cases alleging the same claims against the same defendants, in different jurisdictions. For a class action to be certified, the representative plaintiff must establish that there are common issues or questions of fact or law as among all the class members.

For example, in Ontario, the test for certification requires the following:

1. the pleadings or the notice of application discloses a cause of action;
2. there is an identifiable class of two or more persons that would be represented by the representative plaintiff or defendant;
3. the claims or defenses of the class members raise common issues;
4. a class proceeding would be the preferable procedure for the resolution of the common issues; and
5. there is a representative plaintiff or defendant who would fairly and adequately represent the interests of the class, has produced a plan for the proceeding, and does not have, on the common issues for the class, an interest in conflict with the interests of the class members.

Though Canadian courts, including the Supreme Court of Canada, have taken a more lenient approach to certifying class actions, claimants alleging gender-based discrimination may face several barriers to asserting their claims through a class action.

Historically, claims alleging systemic discrimination have generally been brought under human rights legislation, not through the civil courts. In Lewis v WestJet Airlines Ltd., 2019 BCCA 63, the plaintiffs alleged that WestJet breached their contracts of employment, which incorporated the company’s Anti-Harassment policy by reference. WestJet moved to summarily dismiss the action, arguing that the courts lacked jurisdiction to hear the class action because the “essential character” of the claim was a breach of the Canadian Human Rights Act, which is enforced by the Canadian Human Rights Tribunal. The lower court dismissed the motion. Although the British Columbia Court of Appeal upheld the dismissal of the motion, it acknowledged that there was “substance” to WestJet’s argument.

In certain cases, class proceedings may not be the most appropriate procedure for resolving claims of systemic gender-based discrimination. For example, where claimants seek the imposition of systemic remedies, such as requiring that the organization undertake to correct a discriminatory corporate culture through training or implementing new policies, such remedies may not be available through the civil court system. Moreover, in certain cases, court proceedings may be disadvantageous for the claimants. For example, claims alleging sexual harassment and gender-based discrimination would likely require that plaintiffs give evidence, publicly, as to highly personal, sensitive and emotional traumas. Pursuing non-adversarial dispute resolution may be preferable because it can be carried out on a confidential basis.

Shareholder and Derivative Actions: Liability to Stakeholders

In addition to potential liability flowing from claims by employees or former employees, employers may also be exposed to liability from other stakeholders about gender-based discrimination and sexual harassment in the workplace. In the US, employers are facing a growing number of shareholder actions and derivative actions.

Shareholder actions may be brought by shareholders who allege that the company and its executives lied or misled them about the organization’s adherence to ethical standards. Derivative actions may be brought by shareholders against corporate executives or board members, acting on behalf of the company, alleging breach of fiduciary duty and misuse of corporate assets to pay settlements on behalf of alleged harassers. For the most part, these claims center on the allegation that the defendants had actual knowledge of (or were willfully blind to) the misconduct.

It is foreseeable that the breadth of fiduciary duty owed to shareholders could evolve to encompass the requirement that companies report to their shareholders on gender-based discrimination, sexual harassment or gender pay issues or complaints in the workplace, in addition to promptly adopting corrective remedial measures. Recent legislative amendments are consistent with this direction. In 2018, the Canada Business Corporations Act (“CBCA”) was amended under Bill C-25, requiring that certain CBCA “distributing corporations” disclose their achievement of diversity outcomes and any organizational policies or practices in place regarding diversity at annual shareholders’ meetings. The CBCA will now adopt a “comply or explain” model, requiring that such companies either comply with the additional diversity disclosure obligations or explain their failure to comply. Additionally, TSX-listed companies are also subject to similar diversity disclosure requirements under National Instrument 58-101 – Disclosure of Corporate Governance Practices.

Get Ahead of the Curve

It is safe to say that all employers have an interest in ensuring that their workplaces are free from gender-based discrimination and harassment. As the prevalence of claims against US employers has demonstrated, #MeToo is here to stay. Employers who wish to preserve their reputations, and continue to attract top talent, need to take a serious and critical look at their workplace culture. Permissive cultures and weak governance structures that have enabled instances of gender-based discrimination and harassment to go unquestioned expose organizations to increased risk.

To mitigate potential risk in this area, employers should undertake the following strategies:

1. Have clear policies and enforce them: At a minimum, employers need to set clear workplace harassment policies, educate employees about the policies, and enforce them consistently. Employees need to perceive that offenders will be disciplined appropriately and complainants will be protected from retaliation.
2. Put reporting mechanisms in place: Employers should ensure that they have clear and transparent reporting/complaint procedures, such that employees know where to go if they have a complaint to report and are aware of the investigation procedure and timelines. Employers should also consider having a mechanism in place for anonymous reporting, such as an ombudsman service.
3. Provide robust training: Employers should require that all employees undergo training on workplace policies. Also, employers may wish to supplement such training by mandating that all employees undergo sensitivity training or unconscious bias training.
4. Fix “broken” workplace culture: Policies are not enough to address the issue of workplace harassment. Employers also need to pay attention to certain warning signs in the workplace to effectively stem sexual harassment. According to a recent US research report, “Sexual Harassment of Women”, organizational climate is the greatest determinant of sexual harassment occurring in a workplace. As such, employers need to foster a workplace culture that discourages harassment. For example, employers should consider whether their leadership and workplace as a whole reflect gender balance.[7]

Also, employers need to turn their minds to identifying and remediating any wage gaps in their workplaces. Beyond the benefit of risk mitigation, employers can leverage their accomplishments in this area to position themselves as industry leaders. Employers who have not already done so should undertake the following steps:

1. 1. Conduct a pay audit: Information is of paramount importance to understanding the realities of pay equity that may exist in a workplace. Employers should consider implementing mechanisms to analyze compensation by gender and race on an annual basis.
   2. Check your recruitment practices: Employers should ensure that their recruitment practices are not inadvertently perpetuating the wage gap. For example, employers should refrain from asking candidates about their salary history. Evidence suggests that women generally have a tendency to under negotiate their salary and relying on past salary history may continue this cycle.[8]
   3. Ensure women have equal opportunity for advancement: Women typically receive less feedback, and have less access to mentorship and sponsorship within organizations. For example, a 2017 study found that “only 54% of women have access to senior leaders who act as a mentor or informal sponsors in their career.”[9] Employers should make a concerted effort to ensure that women are provided with these opportunities within their organizations, and encouraged to participate.

In sum, the employers who find themselves on the right side of the #MeToo movement will be those organizations that have taken proactive measures to put safeguards in place that not only address instances of discrimination and harassment, but that also mitigate against future risk.

• Many thanks to Shereen Aly for her assistance with this article.

Notes:

[1] Government of Canada, “Harassment in Canadian workplaces”, online: (2018) <https://www150.statcan.gc.ca/n1/pub/75-006-x/2018001/article/54982-eng.htm>.

[2] Government of Canada, “Women and Paid Work”, online: (2017): <https://www150.statcan.gc.ca/n1/pub/89-503-x/2015001/article/14694-eng.htm>.

[3]Ibid.

[4] Source: https://ravenlaw.com/armed-forces-class-action/

[5] Merlo v Canada, 2017 FC 533 at para 29.

[6] Rozon c Les Courageuses, 2018 QCCA 1333.

[7] For more information on the importance of workplace culture, see Canadian Labour and Employment Law, “Is Your Workplace Prone to Sexual Harassment? 5 Warning Signs to Watch for”, online: (2018) < https://www.labourandemploymentlaw.com/2018/10/is-your-workplace-prone-to-sexual-harassment-5-warning-signs-to-watch-for/>.

[8] Harvard Law School, “Women and Negotiation: Narrowing the Gender Gap in Negotiation”, online: (2018) <https://www.pon.harvard.edu/daily/business-negotiations/women-and-negotiation-narrowing-the-gender-gap/>.

[9] Forbes, “Mentoring Matters: How More Women Can Get The Right People in Their Corner”, online: (2017) <https://www.forbes.com/sites/margiewarrell/2017/06/24/women-mentoring/#2fc5733a22db>.