Proposed Pay Equity Legislation Released for Consultation – May 2017

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Tuesday 2 May 2017

Proposed Pay Equity Legislation Released for Consultation

Pay equity has been in the headlines recently following the Government’s announcement of a $2 billion package to boost the pay for carers in rest homes, disability services and other functions. The settlement was a response to litigation brought under the Equal Pay Act 1972 (EPA) by the Service and Food Workers Union (now Etū) on behalf of a rest home worker.

The Court of Appeal (in Terranova Homes and Care Ltd v Service and Food Workers Union Nga Ringa Tota Inc.) confirmed the EPA provided for both equal pay and pay equity. Equal pay means that men and woman performing the same work should be paid the same. Pay equity is a broader concept. It means that employees in typically female dominated positions or industries should be paid the same as work done in male dominated positions or industries of the same value.

The equal pay litigation highlighted a number of difficulties with interpreting and implementing the EPA. As a result, in October 2015 the Government established a Joint Working Group on Pay Equity Principles to make recommendations for resolving pay equity claims. Following receipt of these recommendations, the Government has released the Draft Employment (Pay Equity and Equal Pay) Bill (“the Draft Bill”) for consultation.

The Draft Bill
The Draft Bill provides that any employee may raise a pay equity claim with their employer. The employer must consider whether the claim has “merit” and respond as soon as is reasonably practicable, but no later than 90 days after receiving the claim. If the employer accepts the claim has merit, the parties must enter into pay equity bargaining. If the employer considers the employee’s wage equity claim does not have merit, the Draft Bill provides the employee may refer their claim to the Employment Relations Authority. The Authority may direct the parties to start pay equity bargaining.

A claim will be considered to have merit if it satisfies three criteria:

    • It relates to work “predominantly performed” by women.
    • There are reasonable grounds to believe the work the employee performs has been “historically undervalued”.
    • There are reasonable grounds to believe the work continues to be subject to “systemic gender-based undervaluation”.

There are number of factors to consider when determining whether a claim has merit. These include historical and cultural factors, whether work is traditionally associated with women, funding sources, the effectiveness of collective bargaining, and employees’ bargaining strength. At first glance, it appears many employers will lack the resources necessary to make such a determination.

As part of the bargaining process set out in the Draft Bill, the parties must consider what male employees who perform “comparable work” are paid. Work will be considered comparable if it is the same or substantially similar. This can include selecting “male comparators”, whose work involves the same or substantially similar skills, experience, responsibilities, working conditions and/or “degrees of effort”. It may be possible to select male comparators outside of the same industry or sector, but this is a last resort. The parties must consider whether there are male comparators in the same business, a similar business, or the same industry or sector (in that order).

The Draft Bill provides that the parties may use mediation to assist with pay equity bargaining. If mediation does not assist or one party to the pay equity bargaining has committed a serious or sustained breach of the duty of good faith, the bargaining may be referred to the Authority for facilitation. The Authority may make recommendations in relation to any matter relating to the bargaining. This can include the selection of comparators.

If pay equity bargaining cannot be settled following mediation and the Authority is satisfied the parties have exhausted all opportunities for resolution, it may fix terms and conditions of employment that are not discriminatory. This includes fixing the pay of affected employees such that it there is no discrimination on the grounds of gender.

The Draft Bill is yet to be introduced into Parliament. Some changes are likely, but we expect the legislation to eventually be introduced in a largely similar form.

The introduction of a more clearly defined concept of pay equity and a mechanism of pay equity bargaining will have significant implications. Many other sectors and industries have been mentioned as being susceptible for claims based on pay equity, such as carers of mental health patients, retail employees and nurses.

The concern for employers will be the proposal to give the Authority the power to fix terms and conditions of employment, including remuneration. This may create an incentive for both parties to reach a compromise in bargaining, mediation or facilitation rather than risking a ‘winner takes all’ outcome.

In the meantime, it is likely unions will raise pay equity issues in collective bargaining in expectation of the new legislation.

Submissions may be made on the Draft Bill through until 11 May 2017.

Please do not hesitate to contact us if you would like to make a submission or would like to discuss how these proposed changes may affect your business.

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