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Pay equity – a new way forward?

Home Insights Pay equity – a new way forward?

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Contributed by: Kylie Dunn and Rachel Carter

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Published on: September 20, 2018

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Yesterday, on the 125th anniversary of New Zealand women winning the right to vote, the Government released the Equal Pay Amendment Bill (full text available here). The purpose of the Bill is noble: the elimination of any gender discrimination which impacts on remuneration in female dominated occupations. 

But does it achieve its intention?

The same proposed process

At a high level, the Bill proposes a framework that is very similar to that put forward in 2017 by the previous government, prior to the election. Rather than focus on litigation as the way to resolve pay equity disputes, the Bill provides a regime through which the parties bargain with each other directly. The focus is on employers and employees (and unions) reaching their own settlements regarding pay equity in the relevant industry without court intervention. 

At this point, the Government has released the Bill in advance of its First Reading, presumably to coincide with Suffrage Day. The Bill will still go through a Select Committee process (with the opportunity for future comment by interested parties) before it will pass into law. Implementation (whether in the form of the current draft or a revised version) is likely to be some months off. Until this occurs, the Terranova case and Equal Pay Act continue to apply.

The process anticipated by the Bill is as follows:

The above process is what is to occur if employees bring pay equity claims. It does not prevent an employee from continuing to utilise the discrimination provisions under the Human Rights Act and the personal grievance regime under the Employment Relations Act. An employee may, however, only use one of the three available processes for any one issue.

The threshold for a pay equity claim

A pay equity bargaining process is commenced by an employee bringing a pay equity claim. To bring such a claim, the employee needs only to establish that:

  • the claim relates to work that is predominantly performed by female employees; and
  • it is arguable that the work is currently undervalued, or has been historically undervalued.

When assessing any historical undervaluation of the work, the Bill proposes that the following be considered:

  • the origins and history of the work;
  • any social, cultural or historical factors;
  • the 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:
    • a dominant source of funding or lack of effective bargaining in the relevant industry, market or sector; or
    • the occupational segmentation in respect of the work; or
    • the failure by the parties to properly assess or consider the remuneration that should have been paid in respect of the work (taking into account a number of factors); or
    • any other feature of the relevant market, industry or sector.

If the parties do not agree about whether a pay equity claim exists, this can be subject to mediation, facilitation and, ultimately, a determination from the Authority.  

It is notable that the process proposed above includes a lower threshold than in previous proposed pay equity amendments. However, the Bill expressly states that any agreement from an employer that a pay equity claim is arguable (or a determination to this effect from the Authority) does not pre-empt the outcome, or require an employer to ultimately accept the claim.  Nonetheless, the good faith bargaining process for pay equity claims does proceed on the basis that the parties will be bargaining over the extent of the issue and how to fix it, not whether the issue exists.

Critically, once a claim is received (regardless of whether it is accepted as arguable), an employer must advise all employees who perform the same or substantially similar work of the existence of the claim and information about how they can join the claim or bring their own claim. This places the notification onus on the employer.

The process to resolve a pay equity claim

Once a claim is established, the parties are encouraged to resolve it between themselves. The resolution process utilises the existing mediation and facilitation tools in the Employment Relations Act toolkit which are available to parties when in collective bargaining.

In assessing whether there is merit in a pay equity claim (ie whether work is currently undervalued or has historically been undervalued), the parties must consider:

  • the nature of the work to which the claim relates, and the nature of the comparators, including:
    • the skills required;
    • the responsibilities imposed;
    • the conditions of the work;
    • the terms and conditions of employment;
    • the degree of effort required to perform the work;
    • the level of experience required to perform the work;
  • the remuneration that is paid to the persons who perform the work to which the claim relates; and
  • the remuneration that is paid to persons who perform comparable work.

The assessment above will still require the identification of appropriate comparators. In other jurisdictions, which have a pay equity claims process, the selection of an appropriate comparator has proved the hardest part of a pay equity process to quantify. This has a significant element of subjectivity as it requires the parties to identify (and agree on) what constitutes "like" work.  The Bill proposes that appropriate comparators may include work performed by male comparators that:

  • is the same as, or substantially similar to, the work to which the claim relates;
  • is different to the work to which the claim relates, if the comparator's work involves the same or substantially similar skills and experience, responsibilities, working conditions or degrees of effort.  

Despite the above, the Bill also proposes that work performed by any other comparator that the parties or the Authority considers is helpful can be considered.

The Authority would also have the ability to make a determination regarding pay equity if the parties cannot agree. This would allow the Authority to set rates of remuneration if it found that undervaluation on the basis of gender had occurred.

Backpay

Unlike the previous government’s proposed pay equity reforms, the current framework does provide for a process by which backpay can be agreed or ordered by the Authority. This would allow the Authority to order up to six years’ backpay if undervaluation was found to have occurred. It is certainly foreseeable that this could be an issue of debate between parties.

It is proposed that claims settled within the first five years of the legislation coming into force would have a shorter back pay window (backpay only from the earlier of the date the claim was notified or the date proceedings were commenced) to incentivise parties to settle claims quickly after the legislation comes into force.

Do I need to do anything?

First, consider whether you have any occupation(s) within your workforce that could feasibly support a pay equity claim.  Are there predominantly female occupations in your workplace, in areas which may have traditionally been considered women’s work?  If so, you need to be across these proposed amendments.

Second, if the amendments could affect you, consider the Bill and whether you want to be involved in the Select Committee process. We will keep you updated on the progress of the legislation as it moves through the House.

Please feel free to get in touch with a member of the team to discuss these issues in more detail.

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