On Tuesday 7 June 2016, the Government announced that the Joint Working Group on Pay Equity Principles (Working Group) had completed its work and provided its recommendations.
While the recommendations and guidance are a welcome first step towards addressing an unclear area of New Zealand employment law, it is clear that pay equity claims will give rise to significant complexity and cost for employers. This is particularly the case for employers in industries where roles have historically been predominantly performed by women, such as in aged care, nursing, and early childhood education.
The Working Group was established in 2015, following the Court of Appeal's decision in Terranova Homes & Care Limited v Service and Food Workers Union & Bartlett (Terranova).1 In Terranova, the Court of Appeal held that the Equal Pay Act 1972 (1972 Act) required employers to pay their employees equal pay for work of equal value (also known as pay equity) and not just equal pay for the same work. The case was then referred back to the Employment Court.
Before further steps were taken in the Employment Court, the Working Group was established to provide recommendations to the Government regarding universally applicable pay equity principles. The Working Group consisted of government, employer and union representatives.
The main elements of the process that the Working Group envisages are:
Pay equity claims may be made by any employee to their employer at any time. In order to determine the merits of any such claim, the employer will need to consider certain factors (described in more detail below).
Employers who receive claims must immediately notify any other of their employees who might also be affected by (or benefit from) the claim.
The employer must respond to a claim within a reasonable period. The employer can either decide that the claim does not meet the criteria for a pay equity claim, or accept the claim and then deal with that claim as part of normal good faith bargaining.
Once accepted as a pay equity claim, the parties are to bargain in order to resolve the claim, with guidance from pay equity principles. These principles require a thorough and objective assessment of the skills, responsibilities, conditions and degrees of effort involved in the work to be undertaken. Comparators may be used provided that the comparator is not distorted by also being undervalued as "women's work."
If the employer does not accept a claim as a pay equity claim within a specified timeframe, the employee may test the merits of the claim in the Employment Relations Authority (Authority) or revise their claim.
Significantly, the Working Group recommended that the Authority will be able to make determinations to fix provisions in employment agreements, including pay, when all other reasonable alternatives for reaching agreement (such as mediation or facilitation) on pay equity claims have been exhausted within a reasonable period.
A pay equity claim will be resolved once the remuneration for the work has no element of gender-based differentiation. Any equal pay that is established through this process must be reviewed and kept current.
Determining the merits of a claim
In order to determine whether a claim has merit as a pay equity claim, the following factors are to be considered:
The work must be shown to be predominantly performed by women and may also include areas where remuneration for the work may have been affected by any occupational segregation or segmentation.
The work may have been historically undervalued because of certain specific factors, such as the origins and history of the work and wage setting for it, or the characterisation or labelling of the work as "women's work."
Whether gender-based systemic undervaluation has affected remuneration for the work due to certain relevant factors, such as:
features of the market, industry or sector which have resulted in continued undervaluation (including a dominant source of funding, and the lack of effective bargaining), and
the parties' failure to properly assess the remuneration that should be paid to properly account for the nature of the work, the responsibility associated with it, the conditions in which it is performed, and the degree of effort required.
If the Working Group's recommendations are implemented, the Employment Relations Act 2000 and 1972 Act will need to be amended to recognise the special characteristics of pay equity claims. These amendments are likely to have particular impact in industries where roles have historically been predominantly performed by women, such as in aged care, nursing, and early childhood education.
Because pay equity claims are complex, and reliant on up to date information and resources (such as pay surveys, past job evaluation methodologies and job sizing tools), a significant concern for employers and employees alike will be how to resource the process described above. The Working Group has recognised this in its recommendations, and noted that obtaining the information necessary to determine a pay equity claim has a financial cost, which may inhibit the resolution of pay equity issues.
The Working Group has suggested that the Government gives further consideration to its role in supporting the provision of pay equity information. Furthermore, it has encouraged the Government to consider training the regulatory and support agencies involved in this process to ensure the effective support of resolution of pay equity issues.
Workplace Relations and Safety Minister Michael Woodhouse yesterday advised that the Government is to consider the Working Group's recommendations and expects to be in a position to respond to them shortly. He acknowledged the importance of this issue and the need to "get it right."
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.