The pay equity deal – what will it mean for employers?

The Government's pay equity deal – what will it mean for employers?

April 19, 2017

Partners John Rooney, Shan Wilson

Yesterday, the Government announced that it has entered into a 'pay equity' settlement in relation to the government-funded service sectors of aged residential care, home support and disability services.

It has been reported that the settlement will cover 55,000 care workers, providing them with a pay rise of between 15 and 49 per cent, depending on their qualifications.

What led to this settlement?

The settlement is the culmination of a line of cases relating to a claim made by Kristine Bartlett, a rest home caregiver, against her employer, Terranova Homes and Care Ltd. Ms Bartlett claimed that both male and female caregivers are paid at a lower rate than would be the case if caregiving of the elderly was not predominantly performed by women (ie that her work has been systematically undervalued due to current, historical and structural gender discrimination).

Considering Ms Bartlett's case, the Court of Appeal confirmed that, in deciding pay equity claims, the courts may have regard to what is paid to males in other sectors (meaning dissimilar sectors) if enquiries within the same sector would not yield an appropriate "comparator group".

The matter was referred back to the Employment Court for guidance on the general principles to be observed in implementing equal pay. However, the Government then stepped into the process to negotiate a settlement.

What are the implications for the care sector?

The Government has stated that the settlement package will result in costs of more than $2 billion, funded through increases in the Health and ACC budgets. Minister of Health, Jonathan Coleman, has also indicated that it could eventually require a lift in ACC levies or higher fees for aged care residents.

In terms of the wider care sector, we expect that the Government's settlement will have a flow on effect by setting a benchmark that the unions will seek to emulate for private sector employees. If private sector employers do not increase wages in line with the Government, they may face difficulties in recruiting and retaining good employees. They would also face a high risk of pay equity claims being brought against them.

What are the wider implications for employers?

The issue of pay equity is not novel to the care sector. Therefore, it is likely that we will also see a range of claims brought by employees in other female-dominated sectors (for example, we understand that special education support workers, social workers and midwives have already been involved in pay equity claims).

To assist in dealing with anticipated claims, in October 2015 the Government established a Joint Working Group on Pay Equity to develop recommendations for practical guidance to employers and employees in implementing pay equity.

The Government accepted the Working Group's recommendations in November 2016. The Recommendations include principles to provide guidance to employers and employees in identifying, assessing and resolving pay equity claims and a process to follow to address pay equity, including a bargaining process. Changes to the Equal Pay Act 1972 and the Employment Relations Act 2000 will be needed to implement these changes and the Government expects to introduce legislation this year.

The changes to the legislation will make it easier for employees to bargain and resolve pay equity claims with their employers, as opposed to only litigating the matter. The new process should be a welcome initiative for employers and employees alike as it will introduce an orderly and accessible process around pay equity. However, those employers who operate within female-dominated industries will need to be mindful of the increased risk of pay equity claims and the impact of financial settlements, given the recent developments in this area.

We will keep you updated on these pay equity matters as they progress.

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