The “Social” aspect of ESG encompasses a broad range of social factors that affect Canadian businesses, including human rights, health and safety, employee engagement and satisfaction, Indigenous reconciliation, and diversity, equity and inclusion (DEI). The latter is the focus of this article.
Canadian companies and their boards of directors are under heightened scrutiny to report on DEI data and to take steps to ensure they are meeting their commitments. Regulators and private securities advisors are also dedicating considerable resources to supporting issuers in advancing these commitments. The Canadian Securities Administrators have published corporate governance disclosures and best practice guidelines open for public comment relating to broader board and executive officer representation beyond gender diversity.
Last month, Institutional Shareholder Services (ISS) and Glass Lewis Co. expanded their disclosure and proxy voting expectations, which recommend that public companies meet certain percentage thresholds for gender diversity. Racial and ethnic representation will be ISS’ focus come February 2024.
One notable area of risk for Canadian businesses is an uptick in class proceedings by employees seeking redress against alleged systemic barriers to inclusion and advancement in the workplace. To date, we have seen proposed class actions by employees seeking remedies for gender- and race-based discrimination in pay, promotion, and retention practices, as well as remedies for workplace misconduct. This trend follows developments in the United States and is an area that Canadian employers should actively follow. In this article we highlight some of the ongoing litigation in this area, as well as best practices that Canadian employers should consider implementing to proactively mitigate the risk of DEI litigation.
Trends and practical implications
Hiring, pay, promotion, retention, and termination
An employer’s alleged systemic discrimination in its hiring, promotion, and retention practices may form the basis for a proposed class action. In Thompson et al. v. His Majesty The King, a proposed class of current and former Black civil servants seek damages for opportunities they lost out on as a result of their race. The claim alleges that Black employees experienced dismissive attitudes and comments related to performance, and were provided with fewer accommodations relative to their non-Black colleagues. The claim also alleges that non-Black employees were treated with favouritism by being given more complex files, better training and mentorship opportunities, and more positive reviews.
Thompson is still in the early stages of proceeding. The Government’s motion to dismiss the claim for lack of jurisdiction, and to stay portions of the claim, as well as the certification motion are all set to be heard in October 2023.
Following Thompson, another proposed DEI class action was brought against the Canadian government. In Zentner and Wells v. His Majesty The King as Represented by the Attorney General of Canada, a proposed class of women with Indigenous ancestry who are former employees of the Government’s various Indigenous ministries claim that they experienced harassment and discrimination on the basis of race, culture, ethnicity, and gender, and were denied deserved promotions without justification.
Following other litigation trends, we expect that claims alleging that certain systemic disadvantages have disproportionately impacted minoritized employees will soon make their way to Canadian private sector employers.
Although these proposed class actions have been brought against the Government (a federal employer with unique statutory and constitutional obligations), we do not think Canadian businesses are immune to such claims. On the basis of litigation trends in the United States1, we expect that claims alleging that certain systemic disadvantages have disproportionately impacted minoritized employees will soon make their way to private sector employers. In response to this trend, businesses should ensure that advancement and termination decisions are well-documented and basedon measurable and objective frameworks that are connected to employment expectations–not protected grounds.
Implementing and enforcing policies prohibiting discriminatory conduct
Canadian courts are increasingly attentive to not only what an employer’s anti-discrimination policies say but how these policies are enforced. In Lewis v. WestJet Airlines Ltd., for example, the British Columbia Court of Appeal certified a class proceeding against WestJet Airlines. The claim alleges that the company protects perpetrators of sexual assault and harassment, especially pilots, and fosters a corporate culture that overlooks and tolerates harassment, encourages silence, and fails to properly investigate complaints2.
The Court of Appeal’s decision signals two things: first, employers are being held to their commitments to guard against employee harassment and discrimination; and second, courts may be willing to find that these commitments form part of class members’ employment contracts.
To mitigate the risk of discrimination and harassment class actions, employers should consider developing and enforcing zero-tolerance policies for any behaviours that foster discriminatory or hostile work environments. These policies should be publicized, and employees should receive training on the expectations and requirements of the policies. All employees, including management and leadership, should be subject to the policies.
Evaluating return-to-office plans
While we have yet to see such a claim in Canada, in the U.S., a proposed class action against Edward Jones has been commenced by an employee who alleges that after she was forced to work from home to avoid allegedly sexist behaviours from her colleagues, she received fewer career advancement and compensation benefits3.
To mitigate the risk of discrimination and harassment class actions, employers should consider developing and enforcing zero-tolerance policies for any behaviours that foster discriminatory or hostile work environments.
Employers should continue to monitor how employees are adapting and responding to any work-from-home or hybrid work policies and whether certain groups of employees may be more likely to opt into work-from-home arrangements. Where this possibility exists, employers should take care to ensure that opportunities do not disproportionately flow to employees working in the office for no reason other than their physical work location.
Objective decision-making for compensation
In a proposed class action in the U.S. against Google, a former employee alleges that the company’s compensation policy of using “salary bands” results in placing over-qualified Black employees into lower salary bands that do not align with their relevant experiences and qualifications4. This case shines a spotlight on how businesses approach compensation decisions. Employers can mitigate unconscious biases that may inform salary and bonus determinations by basing these decisions on objective performance criteria that correspond with industry standards, and where possible, striking a representative committee to make compensation decisions.
Strifling v. Twitter, Inc., Class Action Complaint and Jury Demand filed on December 7, 2022 in Case No.: 3:22-cv-07739; Curley v. Google, LLC. Plaintiff’s Class Action Complaint filed on March 18, 2022 in Case No.: 5:22-cv-01735; Borodaenko v. Twitter, Inc., Class Action Complaint and Jury Demand filed on November 16, 2022 in Case No.: 3:22-cv-07226.
Zigler v. Edward D. Jones & Co., L.P. et al. Plaintiff’s Class and Collective Action Complaint filed on September 1, 2022 in Case No.: 1:22-cv-4706.
Curley v. Google, LLC. Plaintiff’s Class Action Complaint filed on March 18, 2022 in Case No.: 5:22-cv-01735.
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This publication is a general discussion of certain legal and related developments and should not be relied upon as legal advice. If you require legal advice, we would be pleased to discuss the issues in this publication with you, in the context of your particular circumstances.
For permission to republish this or any other publication, contact Janelle Weed.