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Proposed pay equity legislation: more questions than answers

Proposed pay equity legislation: more questions than answers

By Catherine Fleming | 29 March 2017

The introduction of new pay equity legislation is among the Government’s priorities for this year, with a bill likely to be put forward in the next couple of months.  The proposed framework will have implications for employees in, and employers of, all female-dominated workforces.  The principles proposed are aspirational, but there is no question that implementation will be quite a challenge. 

Pay equity is the principle that employers must pay men and women “equal pay for work of equal value”.  This means not just that an employer must pay a man and a woman the same amount to do the same job, but also that jobs which are different, but have “equal value” must be remunerated equally, unless any differences in remuneration can be explained by factors that are not influenced by gender.  Under the proposals, differences in remuneration for jobs of the same value across organisations, and even across sectors, may be relevant to determining a pay equity claim.

The proposal is that the new pay equity ‘principles’ will slot into the existing Equal Pay Act 1972 and use the dispute settlement mechanisms in the Employment Relations Act 2000.  In summary, the principles (recommended by a Joint Working Group and accepted by Cabinet late last year) say: 

- An employee will be able to make a pay equity claim to their employer at any time.  The employer must immediately notify other affected employees.  If a claim is accepted to be a genuine pay equity claim (as opposed to simply a general complaint about pay), the parties will initially attempt to resolve the claim through bargaining.  If bargaining is unsuccessful, a claim may be made to the Employment Relations Authority, and will be resolved with the assistance of the normal dispute resolution institutions.

- Determination of a pay equity claim, either through bargaining or other processes, is to be guided by, among other things:

  • Assessing the skills, responsibilities, conditions and degrees of effort required for the job in question, ensuring that factors that are commonly overlooked or undervalued in female-dominated work are considered; and
  • Comparing the remuneration for the job in question with comparable jobs (including in some cases jobs in other sectors) where the remuneration is not affected by any potentially discriminatory undervaluing.

The principles as proposed by the Joint Working Group are ambitious.  In order to identify the effects of systemic undervaluation, a claimant will be able to rely on evidence about how jobs of comparable value are remunerated across organisations, and even, in some cases, across different sectors.  This approach in theory allows for a truly ‘systemic’ analysis but it also throws up a host of practical problems.  Most pressingly, how is cross-organisational job value and remuneration information to be made available?  And how are the differences between organisations to be allowed for?  The principles are worryingly silent on these important issues.      

Perhaps equally ambitious is the Joint Working Group’s faith in the ability of parties to resolve pay equity disputes by bargaining and agreement.  The potential for litigation in claim-based pay equity systems like the one proposed in New Zealand has is evident from the overseas experience.  Similar high-level pay equity principles in the Canadian setting resulted in litigation spanning up to three decades.  The incentive for long-term litigation is obvious in the amounts at stake – one public sector employer was ultimately ordered to pay $3.5billion.  While the UK has not seen quite the same duration of litigation, research shows claims have been taking up to 10 years to be resolved.

Quite apart from how the principles themselves will work in practice, there are a plethora of important technical factors that, in an ideal world, would be addressed in legislation.  For example, how (and whether) the tests are to apply to small businesses, how pay equity awards are to be phased in, and whether and to what extent backpay can be ordered, and how frequently can a pay equity settlement be reviewed?

No doubt a significant amount of work is being done behind the scenes to adapt the principles to an appropriate form for legislation.  It is to be hoped that the bill, once produced for public consultation, will be clearer and more comprehensive than the recommendations in their current form.  And there remains, of course, the opportunity for further discussion during the legislative process.  In the meantime, if you think you might be affected by the new legislation, it can’t hurt to get a conversation started with your employer, employees, and others in your sector.  If New Zealand is going to do better than its counterparts overseas, conversation and agreement is going to be key.    

Catherine Fleming is a Senior Associate in Kensington Swan’s Litigation and Public Law Practice. She specialises in all areas of public law, including public decision-making, discrimination and human rights issues, regulation, public inquiries, immigration, and health law. 

Want more information?

Join Cat Fleming, Charlotte Parkhill and Greg Cain from Kensington Swan in Auckland on 5 April, or in Wellington on 6 April when they will share their understanding of the proposed framework, explore some of the potential effects the legislation may have and talk about how best to prepare yourself and your organisation.

To register for the Auckland seminar click here.

To register for the Wellington seminar click here.

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