Parliament has now passed the Equal Pay Amendment Bill, which will amend the Equal Pay Act 1972. New Zealand's law already required both equal pay (the same pay for the same work) and pay equity (the same pay for work of same value), but we now have a new (but familiar) process for dealing with claims of this nature. The amendments come into force in three months. A full text of the Amendment Bill is available here.
An individual will have a choice whether to use the new process for a pay equity claim, to make a claim of unlawful discrimination under the Human Rights Act or to raise a personal grievance under the Employment Relations Act. But an employee may only choose one of these avenues and may only choose once (commencing litigation for any of these options bars use of a different avenue).
Under the amendments a pay equity claim can be raised by an individual employee (or group of employees) or by a union. Multiple unions can make a claim together against one or multiple employers. If a claim involves multiple employers, the employers must enter into a pay equity process agreement, which sets out the representatives for the employers and how decisions relating to the claim will be made. If multiple union claims are raised with a single employer, the claims must be consolidated.
If an employer receives a pay equity claim, they must notify all other employees who perform work that is the same, or substantially similar, to the work performed by the claimant.
As mentioned above, the substantive obligation for employers remains the same – employees must be paid the same for work of the same value. Before the amendments, a determination of what constitutes work of the same value was made by the courts in litigation. Once the amendments come into force, there will be a new process for pursuing a pay equity claim.
Step 1: Establishing a pay equity claim is arguable
An employee, employees or union can raise a pay equity claim with an employer or multiple employers. The employer(s) must then consider whether the pay equity claim is arguable (this is a lower threshold from accepting that there is, in fact, an issue).
A pay equity claim is arguable if:
(a) the claim relates to work that is or was predominantly performed by female employees; and
(b) it is arguable that the work is currently undervalued or has historically been undervalued.
Work is considered "predominantly performed by female employees" if it is (or was historically) performed by a workforce of approximately 60% female workers.
When assessing if it is arguable that the work is currently or historically undervalued, the following things are to be considered:
- the origins and history of the work;
- any social, cultural or historical facts;
- characterisation of the work as women's work;
- that the nature of the work requires an employee to use skills or qualities that have been generally associated with women, or regarded as not requiring monetary compensation;
- any sex-based systemic undervaluation of the work as a result of any of the following factors:
- a dominant source of funding across the relevant market, industry, sector, or occupation;
- occupational segregation or occupation segmentation in respect of the work;
- the failure by the parties to properly assess or consider the remuneration that should have been paid to properly account for the nature of the work (taking into account a number of factors); or
- any other feature of the relevant market, industry, sector or occupation.
If an employer decides that the pay equity claim is arguable (or is deemed to have accepted the claim is arguable), the claim moves to the pay equity bargaining process. Agreement from an employer that the claim is arguable does not pre-empt the outcome or require an employer to accept the pay equity claim.
If the parties do not agree that a pay equity claim is arguable, the parties may attend mediation or refer the question to the Employment Relations Authority for facilitation or a determination. The processes are similar to the mechanisms available to an employer and union during collective bargaining.
Step 2: Pay equity bargaining process
Once it is established that the claim is arguable, the parties must determine whether (and to what extent), the employee's work is undervalued by assessing:
- the nature of the work to which the claim relates, and the nature of comparators including:
- the skills required;
- the responsibilities imposed;
- the conditions of work;
- the degree of effort required to complete the work;
- the level of experience required to perform the work;
- any other relevant work features; and
- terms and conditions of employment of the persons who perform the work to which the claim relates;
- terms and conditions of employment of the persons who perform comparable work;
- remuneration that is paid to the persons who perform the work to which the claim relates;
- remuneration that is paid to persons who perform comparable work.
When making the assessment against "comparable work", this may include work performed by male comparators that:
- is the same, or substantially similar, to the work to which the claim relates; or
- involves the same, or substantially similar, skills and experience, responsibilities, working conditions or degree of effort.
The pay equity claim can be settled between the parties, or the Authority or Court can issue a determination. Again, the Authority and Court will follow similar processes to where an employer cannot agree.
The heart of the issue
It is great to see this issue getting attention from Parliament. But will these amendments assist in determining pay equity claims? The key question will remain – how do we determine whether the work is of the same value? This involves a subjective assessment of the worth of an individual's work. It may well be that we need a substantial body of case law interpreting the relevant factors before we can see real advancements in the law in this area.
Please feel free to get in touch with a member of the team to discuss these issues in more detail.