Perhaps fittingly, the Equal Pay Amendment Act 2020 comes into force in the same week that Kamala Harris has been confirmed to become the first female Vice-President-elect of the United States.

How will this Act affect New Zealand’s employment landscape?

This Act introduces the ability for employees to bring equal pay claims and pay equity claims against their employers.

An equal pay claim is a claim that an employer has provided different rates of pay to employees who perform the same or substantially similar work, on the basis of sex. This is (hopefully) not a novel concept and it is arguably already covered by the discrimination sections of the Human Rights Act 1993 and the Employment Relations Act 2000.

A pay equity claim is more interesting. It is a claim that an employer has differentiated, on the basis of sex, between remuneration offered for:

  • work that is exclusively or predominantly performed by female employees (that is, 60% or more of the workforce is female),

and

  • work that is performed by male employees who have the same, or substantially similar skills, responsibility, experience and work conditions.

The law seeks to correct systematic pay distortion across industries, which have arisen because those industries have historically been dominated by undervalued female workers. It is the correction of a systematic injustice.

While the Act has the potential to correct historic injustices, it also provides a useful negotiating tool for unions in traditionally female dominated industries such as teaching and nursing. Employers will now have to be cognisant of developments in neighbouring industries as well as their own.

How does a claim work? A highly simplified overview

A pay equity claim is arguable if it relates to work that is predominantly performed by female employees and it is arguable that work is currently undervalued or has historically been undervalued. This circular reasoning is not particularly helpful but signals that the threshold to bring a claim are low.

Claims may be brought by individuals or unions, although the industry-wide nature of such claims suggests that it is more suited to the latter. Interestingly, union claims automatically cover all affected employees (including new employees), not just its members. Employees may choose to opt-out.

Upon receiving a claim, an employer will be required to form a view within 45 working days as to whether the pay equity claim is arguable, keeping in mind the low threshold.

If an employer accepts that the claim is arguable (which is not a concession that there is a pay equity issue), the parties enter into the pay equity bargaining process. If the employer does not accept that it is arguable, it must set out the reasons for its decision. The claimant may then refer this question to mediation or the Employment Relations Authority.

BuckettLaw’s thoughts:

  • The biggest challenge in raising a claim is likely to be assessing appropriate male-dominated industry comparators. For example, is carpentry an appropriate comparator to teaching? The Act states that the following factors (among others) should be assessed:
    • Skills and experience required for the work
    • Responsibilities imposed
    • Working conditions
    • The degree of effort required
    • Terms and conditions of work.

It is difficult to see how such an assessment can be objective. The new government has undertaken to create a database to ensure better records of pay equity in New Zealand, and this will hopefully provide guidance to assessing viability of pay equity claims.

  • Determinations may provide for recovery of work for remuneration from the beginning of the applicable start date for the claim. There is no opportunity to recover for past underpaid work. While the Act is a step in the right direction and there is no easy solution (it would not be fair to require employers to backpay an entire industry of employees before they were put on notice of potential pay equity issues), it does leave an unsatisfying lacuna of past injustice unresolved.
  • There is a concern that parties will be over-litigious. Despite the low threshold, is any employer going to accept that a pay equity issue is arguable? Will there be justice for all if claims are resolved in confidential mediations? The answer is that at this juncture, we just don’t know.

The amendments to the Equal Pay Act which come into force are likely to give rise to interesting developments within the employment landscape within the next few years. The information above only scratches the surface of the implications of the new Act and should not be taken as legal advice.

If you need assistance or are concerned that you have been treated unfairly, contact us for an obligation free discussion.