Pay Equity – The issue that should be on everyone's radar

Home Insights Pay Equity – The issue that should be on everyone's radar

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Contributed by: Kylie Dunn and Emma Peterson

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Published on: May 05, 2017


The draft Employment (Pay Equity and Equal Pay) Bill (Bill) was released for consultation last week by the Ministry of Business, Innovation and Employment. If voted into law, the Bill would establish a framework through which employees could bring equal pay, gender discrimination and pay equity claims. 

The Bill proposes a formal process that includes the possibility of the Employment Relations Authority setting new wage rates to ensure pay equity for occupations that have traditionally been regarded as "women's work". In doing so, it creates a legal framework to implement the Terranova line of cases that dealt with a pay equity claim by an aged care worker. The framework in this Bill would apply to all New Zealand workplaces. 

The Bill is still very much in its early stages, and is yet to be introduced into Parliament. Any introduction of the Bill (whether in its current form or in any amended form) would occur after MBIE has considered submissions received and made any amendments to the draft Bill.  Should the Bill be introduced into Parliament, a usual select committee process will then follow (with the opportunity for further public submission). There is currently no timeframe indicated for implementation.

Pay equity vs equal pay

Pay equity differs from equal pay. Equal pay refers to men and women receiving the same pay for the same work. It is usually relatively straightforward to assess in an objective manner. Pay equity refers to the concept that women should be paid the same as men for doing different jobs of the same value. A comparator is critical to the assessment of pay equity. Selection of a comparator often includes a subjective assessment of value.

The amendments regarding equal pay and gender discrimination are not likely to be controversial.  The proposed pay equity framework does, however, require careful consideration.

Framework for resolution of pay equity claims

The Bill would establish the following framework for pay equity claims:

  • Any employee may make a pay equity claim (including a male employee in a predominately female occupation).
  • An employer must assess the claim as soon as possible (but within at least 90 days) to see if it has "merit".
  • For a claim to have "merit":
    • it must relate to work predominately performed by women; and
    • there must be reasonable grounds to believe that the work has historically been undervalued for a number of specified reasons which include the origins of the work, social and cultural factors and the characterisation of work as "women's work"; and
  • there must be reasonable grounds to believe that it is still undervalued.
  • If the employer decides that the claim has "merit", then the parties are required to enter into a pay equity bargaining process. The process includes mediation and, if required, facilitation (adopting the Employment Relations Act framework for facilitation in collective bargaining).
  • Bargaining would include finding an agreed comparator against which to assess remuneration.
  • If there is a dispute at any stage (including in relation to whether a pay equity claim has "merit"), then the matter can be referred to the Employment Relations Authority. The Authority would have the power to set remuneration in the event of a dispute.

Two potentially significant issues arise from this process:

  1. Granting the Authority the power to set terms and conditions is a significant departure from its usual investigative jurisdiction. While it has had the power to set terms and conditions in a situation of protracted collective bargaining since 2004, it has never exercised this power.
  2.  Once it is determined that a pay equity claim has "merit", the identification of a relevant comparator will be a central issue in the assessment of a pay equity claim. The Bill requires that the comparator is work performed predominantly by male employees involving the same or substantially similar work, skills and experience, responsibilities, working conditions and/or degree of effort. Critically, a comparator group is to be found within the employer's business, or if that is not possible one of the following (in order):
  • a similar business;
  • a business in the same industry/sector; or
  • a business in a different industry/sector.

It is certainly foreseeable that identification of an appropriate comparator group will be difficult.

Where to from here?

The Bill, if passed, is likely to have wide-ranging effects on employers who employ employees in traditionally female roles which also tend to be lower paid (cleaning, food preparation and some clerical/administrative roles immediately jump to mind). Employers should be alert to the possibility of pay equity claims. We anticipate that the Bill is likely subject to heavy scrutiny as it progresses through Parliament, as its enactment would effect a broad range of industries across New Zealand.  In particular, the selection of an appropriate comparator will be critical to the assessment of pay equity claims. The proposed framework for selection is broad and, in many respects, uncertain.  

There is a lot of detail in the draft we have not included in this brief overview. A copy of the full draft Bill and MBIE consultation paper can be obtained here

MBIE has asked for written submissions on the Bill by Thursday 11 May 2017. We will keep you updated on its progress.

This publication is intended only to provide a summary of the subject covered. It does not purport to be comprehensive or to provide legal advice. No person should act in reliance on any statement contained in this publication without first obtaining specific professional advice. If you require any advice or further information on the subject matter of this newsletter, please contact the partner/solicitor in the firm who normally advises you, or alternatively contact one of the partners listed below.

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