Breakthrough for pay equity - an historic settlement and new Bill

Monday 24 April 2017

Authors: Rob Towner, Liz Coats and Rebecca Compson

​On 18 April 2017, the Government entered into a legal settlement which has been described as providing the largest pay increase in New Zealand’s history. The settlement recognises that support workers in aged care, disability residential care, and home and community support services (together, the Services), have been paid less because these jobs are predominantly undertaken by women. Under the deal, the Government has given a NZ$2 billion undertaking over the next five years to significantly increase the remuneration of around 55,000 care workers throughout New Zealand.

The settlement

The settlement will have broad reaching effects:

  • From 1 July 2017, around 20,000 care workers currently being paid the minimum wage of NZ$15.75 per hour will receive an increase in pay to a minimum of NZ$19 per hour. This is equivalent to a 21% pay rise.

  • The affected employees will receive a pay rise of between 15-50%, depending on their qualifications. For a full-time worker, this means they will be taking home around an extra NZ$100 a week, which is over NZ$5,000 a year.

  • Around 55,000 workers in the Services will also receive increases in wages of between NZ$19-$27 over five years.

  • Existing workers in the Services will be transitioned to positions on the new pay scale which reflect their skills and their experience.

  • New workers employed after 1 July 2017 will receive wages based on their level of qualifications.

All employees in the Services will receive the new wage rates regardless of whether or not they belong to a union.

The parties to the settlement have agreed to create incentives to help care and support workers gain formal qualifications. Employers that provide the Services will be required to provide the necessary systems and support to enable workers covered by the settlement to reach specific qualifications within defined time periods. The Government will fund training for each employee for two days per year as its contribution to education and training.

Pay equity legislation

On 20 April 2017, Workplace Relations and Safety Minister Michael Woodhouse released a draft of the Employment (Pay Equity and Equal Pay) Bill (the Draft Bill) for public consultation which can be viewed here.

The Draft Bill prescribes the minimum pay rates (to ensure employees receive their enhanced remuneration) and will extinguish all other pay equity claims made prior to 1 July 2017 for employees covered by the settlement.

In addition, the Draft Bill sets out a framework for the settlement of pay equity claims. Broadly, this framework provides that:

  • any employee may raise a pay equity claim with their employer,

  • upon receiving a claim, the employer must assess and determine the merit of the claim based on factors set out in the Draft Bill. The employer’s decision to refuse a claim can be challenged,

  • if the employer accepts that the claim has merit as a pay equity claim, the parties must enter into pay equity bargaining,

  • bargaining is guided by principles on how the work is assessed in pay equity bargaining. This involves an assessment of the work and the work of suitable comparator occupations,

  • the parties may agree to a bargained outcome at any point, and

  • where bargaining reaches an impasse, the parties may access mediation or facilitation or determination by the Employment Relations Authority.

Consultation on the Draft Bill closes on Thursday 11 May 2017 and legislation is intended to be introduced shortly after.

The implications

The NZ$2.048 billion settlement over five years will be funded through an increase of NZ$1.856 billion to Vote Health and NZ$192 million to ACC. ACC levies have already been established for the next several years, however there is potential for these levies to be increased as required over the next decade. In 2018, the Ministry of Health/District Health Board funding is estimated to be NZ$303 million and ACC $31 million. Some individuals in aged care residential care facilities may also see an increase in their facility costs as determined in the course of the annual Aged Residential Care contract negotiations.

As was envisaged by Chief Judge Colgan in 20131, the issues relating to equal pay in the care sector and the principles that have emerged are expected to have a broad ripple effect on other sectors where there is a combination of female-dominant and low-paid workforces.

Union’s reaction to the Government’s Draft Bill

The Draft Bill was released for public consultation less than a week ago, but it has already been met with criticism from the Council of Trade Unions (CTU), the Public Service Association (PSA) and E tū, amongst others. The primary concern is that section 23 of the Draft Bill requires claimants to compare a (female dominated) industry to a suitable industry comparator when making claims in relation to pay equity, i.e. to identify wages earned by men who perform work with similar experience, skills and responsibility, to identify a gender pay gap.

The Green party consider the Draft Bill will “scrap the Equal Pay Act and in effect overturn the Terranova court ruling... (which) established the right to look outside the affected industry for a comparable job.” The CTU consider the Draft Bill “inhibits” the ability to make claims in relation to pay equity, and the PSA have claimed that the Draft Bill would “perpetuate discrimination” and would “slam the door on future claimants”. E tū consider that if the Draft Bill is not amended, women would face too many hurdles to achieve equal pay by “forcing women, through their unions, to firstly identify appropriate male comparators in their employer’s business, then similar businesses, to their employer; then the same sector or industry, and only then can they use comparators from outside their industry.” The concern is that, for example, employees in the aged care sector would struggle to find an appropriate industry comparator, “where employees are poorly paid across the board due to discrimination,” and that this arduous process will result in future equal pay claims being ultimately unachievable.

Michael Woodhouse has recognised that “there are still issues to work through” in terms of what comparator is appropriate and how approximate that comparator should be to the industry when negotiating in relation to any potential gender pay gap, and has noted that this was an issue on which the Joint Working Group2 was unable to reach consensus. He has emphasised that the Draft Bill remains open for public consultation and that he welcomes further feedback.


1 Service And Food Workers Union Nga Ringa Tota Inc v Terranova Homes and Care Ltd [2013] NZEmpC 51. Bell Gully acted for Terranova in this proceeding and the subsequent appeal to the Court of Appeal.

2 In October 2015 the Government established a Joint Working Group to develop and recommend pay equity principles that provided practical guidance to employers and employees in implementing pay equity.


Disclaimer

This publication is necessarily brief and general in nature. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.

For more information
  • Rob Towner

    Partner Auckland
  • Tim Clarke

    Partner Auckland
  • Rachael Brown

    Partner Wellington
  • Liz Coats

    Senior Associate Auckland
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