New Zealand is tabling a new Bill that will provide a bargaining framework for gender pay equity claims. The draft Bill is being proposed against the backdrop of a NZ$2 billion pay equity settlement for the healthcare industry, a sector that comprises a predominantly female workforce. Compliance with new legislation could cost employers a ‘significant’ amount of money and time, one lawyer believes. 

The Bill has these features:

  • Reaffirms that employers are prohibited from discriminating against employees, on the basis of gender, in relation to remuneration and other terms and conditions of employment;
  • Distinguishes between three types of claims (equal pay, pay equity, and gender discrimination on non-remuneration matters);
  • Sets out processes for resolving the different types of claims (including pay equity claims);
  • Any employee may raise a pay equity with their employer and upon receiving a claim, the employer must assess and determine the merit of the claim; and
  • If the claim has merit, the parties must enter into pay equity bargaining which is guided by principles of work assessment and the work of comparator occupations.

Pay equity

Phillipa Muir

While the Equal Pay Act has been in force since 1972, and some equal pay claims have been made over the years, the Court of Appeal decision in Terranova Homes & Care Ltd v Service and Food Workers Union Nga Ringa Tota Inc [2014] NZCA 516 has been instrumental in driving the creation of the Bill. “There could be an increase in industry-wide equal pay and pay equity claims once this proposed legislation is introduced,” says Phillipa Muir, partner at Simpson Grierson. “Employers will need to be ready for this.”

In the Terranova case, the court took a broad interpretation of pay equity and determined that it makes sense to identify a comparator profession when an industry has a distorted pay rate that is undervalued systematically. Prison guards were used as a comparator profession to aged care workers. “In making comparisons, claims would start with the employee’s workplace, then with similar businesses and then similar industries,” says Sherridan Cook, partner at Buddle Findlay.

Under the draft Bill, a pay equity claim may have merit if:

  • The claim relates to work that is predominantly performed by female employees;
  • There are reasonable grounds to believe the work:
  • Has been historically undervalued for one or more reasons set out in the Bill (for example, characterisation of the work as women's work); and
  • Continues to be subject to systemic gender-based undervaluation, taking into account all relevant matters, including reasons for undervaluation as set out in the Bill (for example, features of the relevant labour market, industry, sector, or occupation).

How businesses should prepare

Businesses should review their employment schemes to see if there are differences between payments to male and female employees. Sectors that are dominated by female employees will need to be prepared for potential claims and may need to reassess their employee remuneration and benefits. “Employers could assess and audit employee remuneration and benefits for their workforce to assess whether there are any differences in the treatment of their employees based on gender, for example, with remuneration paid to employees performing the same, or substantially the same work,” says Muir. “Differences in treatment on the basis of gender could amount to discrimination.”

“The considerations required in determining whether a pay equity claim has merit are quite detailed and therefore likely to involve significant compliance costs and be quite time consuming for employers,” adds Muir. “This is particularly so when looking into the factors relating to historic undervaluation and systemic gender-based valuation as currently set out in the Bill.”

Muir notes that with the volume of new claims that may come in and claims that will likely involve lengthy mediations, the Ministry of Business, Innovation and Employment (MBIE) will increase mediation resources to meet the demand in employee claims.

Sherridan Cook

“For sectors such as healthcare and education, and clerical staff, which have a higher proportion of female workers, businesses may face pay equity claims,” says Cook. “It is a difficult question to ask and solve, so it will be important for businesses to gather with other businesses in the industry to take a look at their workforce to see if there may be inadvertent discrimination.”

Comparison with other jurisdictions

The new Bill will allow New Zealand to modernise its policies on gender pay equity and help to bring it in line with other countries on best practices and international instruments.

“Under the draft Bill, the onus is on the employee to bring up the claim,” says Cook. “This is similar to jurisdictions such as Australia and the UK but different than places such as the province of Quebec in Canada where employers must take proactive steps in certifying that they do not discriminate.”

Muir points out that the International Labour Organisation (ILO) Convention Concerning Equal Remuneration for Men and Women Workers of Equal Value (Convention 100) is most relevant for comparative purposes. New Zealand ratified Convention 100 in 1983, after enacting the Equal Pay Act. “Regardless of New Zealand's current legislation relating to gender equality, the ILO Committee has subsequently indicated that New Zealand has not given complete legislative effect to the principle of equal pay for men and women in relation to work of equal value,” says Muir. “The Bill is likely to bring New Zealand further in line with international instruments such as Convention 100.”

Employers should be aware of the potential new merits for gender pay equity claims and continue to monitor future versions of the gender pay equity and equal pay Bill.