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Geoff Bevan

Over the next few years we are likely to see some significant pay equity claims and settlements which will affect a large number of employers and employees, both union and non-union.    

Businesses that employ a predominately female workforce (or who have certain roles/positions that are mainly or exclusively occupied by females) need to keep up with developments in this area.

The Government has now released a draft Bill which sets out how pay equity claims are to be dealt with.  Submissions on the draft Bill close on Thursday 11 May.

Recap:  How did we get here?

In its ground breaking TerraNova decision the Court of Appeal held that the Equal Pay Act 1972 requires more than the same pay for the same work.  It also requires pay equity - the same pay for men and women who undertake work of equal value.  

This means female employees can now bring a legal claim for increased pay on the basis that they are underpaid compared to other (male dominated) industries which require comparable skills, experience and effort.  

Exactly how these claims will be bought and decided has up until now been unclear - the situation is (at least in New Zealand) virtually unprecedented.

The Government has, to its credit, taken a proactive approach that both supports the equity principles laid out by the courts and looks to provide some clarity for claimants and employers about how these claims can be made and resolved. 

A joint employer and employee working group was established, and it made recommendations to the Government in May 2016.

The Government recently announced the biggest pay settlement in New Zealand history for aged care workers, which was the focus of the TerraNova case. 

At the same time it said it would implement the joint working group’s recommendations by updating the Equal Pay Act and Employment Relations Act 2000, and it released a draft Employment (Pay Equity and Equal Pay) Bill for consultation.

New framework for resolving pay equity claims

If enacted, the Bill would replace the Equal Pay Act and amend the Employment Relations Act to establish a framework for raising and settling pay equity claims.

A pay equity claim alleges that female employees are being paid less than they should be based on comparisons to similar work in other male dominated industries.  The essence of a pay equity claim is that the work has been historically undervalued because it has been (and potentially still is) considered a female job.

The framework encourages parties to settle pay equity claims themselves, and includes a number of steps and interventions to help this happen.  If settlement is not possible then the Employment Relations Authority can ultimately determine the pay rates/terms and conditions that should apply.

To broadly outline the proposed framework:

• If an employee (or group of employees) raises a pay equity claim the employer must consider a range of factors to decide if the claim has merit.  A claim has merit if:
• it relates to work that is predominantly performed by female employees; and
• there are reasonable grounds to believe that the work has been historically undervalued, and that it continues to be undervalued.
• Whether work has been historically undervalued must be decided based on:
• the origins and history of the work, including how wages have been set;
• any social, cultural or historical factors;
• the characterisation of the work as “women’s work”; and
• whether the nature of the work requires an employee to use skills or qualities that have been:
  • generally associated with women; and
  • regarded as not requiring compensation.
• Employers have 90 days to decide whether or not they accept that the claim has merit, although they can extend this timeframe if they have good reason.  Employers must also acknowledge receipt of the claim within 7 days of receiving it, and notify other employees who perform the same (or substantially similar) work, normally within 30 days.
• An employer’s decision that a pay equity claim does not have merit can be challenged by referring the matter to mediation, or to the Employment Relations Authority for a decision.
• If the employer accepts (or the Authority decides) that a pay equity claim has merit, the parties must enter into pay equity bargaining. Pay equity bargaining requires assessing the nature and the remuneration of the work (and of comparable work) free from gender-based assumptions, and then deciding what the appropriate pay rates and terms are.  An important part of this assessment is finding an appropriate male (or male dominated job) to use as a comparator.  The Bill says that the parties should look first to roles within the same employer or sector.  If that is not possible, the parties should look to roles in different industries (for example the rates paid to mechanics might be used to assess what a tailor should receive).
• The Bill allows claims to be consolidated, including across different employers.
• If the parties reach a settlement then this must be recorded, and will be binding.  Settlements must include a process of regular reviews to ensure pay equity is maintained.   The employer must also keep records of pay equity claims and settlements.
• If the parties cannot agree on an increase which achieves equity then they can use mediation and then (in certain circumstances) ask the Authority to assist with their bargaining, by facilitating the process and making recommendations. 
• Ultimately the Bill gives the Authority the power to set pay rates if agreement is not possible.   The Authority’s determination can include back pay, but only back until the day the equity claim was lodged. 

Please contact us if you would like more information about the proposals, or you wish to make submissions and would like us to assist.

Gerrad Brimble & Geoff Bevan

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Geoff BevanGerrad Brimble