New Zealand Law Society - $2 billion pay equity settlement for 55,000 care and support workers

$2 billion pay equity settlement for 55,000 care and support workers

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The Government has announced a $2.048 billion pay equity settlement for about 55,000 workers in the aged and disability residential care and home and community support services.

The settlement, which commences in the first pay run after 1 July 2017, will be introduced over five years.

Background information released by Health Minister Jonathan Coleman says legislation will be introduced to Parliament shortly to prescribe the minimum pay rates to ensure providers pass on the new wages to employees. It will also extinguish all other pay equity claims made before 1 July 2017 for employees covered by the settlement.


Those who are affected are an estimated 55,000 workers (equal to about 29,300 full-time equivalents). Those covered provide home and community care, aged residential care, and community residential support.

These services are provided in a person's home, home-like setting, residential care facility or workplace to assist the person with care and support to enable them to continue to live or work in that place and participate in everyday life in their community.

The settlement does not include behavioural support services, caregiver support, child development services, environmental support, funded family care, and mental health services.

How did this arise?: The Employment Court

The settlement originated in a case filed in the Employment Court by the Service and Food Workers Union (now part of E Tū) on behalf of care worker Kristine Bartlett. Ms Bartlett was a care worker employed by TerraNova Homes and Care Ltd (Service and Food Workers Union Nga Ringa Tota Inc v TerraNova Homes and Care Ltd [2013] NZEmpC 157).

"In essence the claim is that the female caregivers employed by the defendant are being paid a lower rate of pay than would be the case if caregiving of the aged were not so substantially female dominated, because those caregivers are female," the full Employment Court stated. It then noted that while the claim was brought on behalf of a limited number of plaintiffs it had potentially broad implications, "not only within the residential aged care sector but more generally."

The Court agreed to hear and determine eight preliminary questions of law. It found the key issue raised by the questions to be “the scope of the requirement for equal pay for female employees for work exclusively or predominantly performed by them, and how compliance with that requirement is to be assessed".

Recognising the importance of the case, six organisations sought leave to intervene. These were the Human Rights Commission, New Zealand Council of Trade Workers, Pay Equity Challenge Coalition, Coalition for Equal Value Equal Pay, New Zealand Aged Care Association Inc, and Business New Zealand Inc.

The Employment Court found that section 9 of the Equal Pay Act 1972 gave it jurisdiction to state general principles for the implementation of equal pay.

It said that section 3(1)(b) of the Act requires that equal pay for women for work predominantly or exclusively performed by women, "is to be determined by reference to what men would be paid to do the same work abstracting from skills, responsibility, conditions and degrees of effort as well as from any systemic undervaluation of the work derived from current or historical or structural gender discrimination".

The Court also held that when considering the section 3(1)(b) rate of remuneration that would be paid to male employees with "the same, or substantially similar, skills, responsibility, and service, performing the work under the same, or substantially similar, conditions and with the same or substantially similar, degrees of effort" the Employment Relations Authority or Court was entitled to have regard to what was paid to males in other industries "if those enquiries of other employees of the same employer or of other employers in the same or similar enterprise or industry or sector would be an inappropriate comparator group".

The appeals

TerraNova appealed and the Employment Court decision went to the Court of Appeal (TerraNova Homes and Care Ltd v Service and Food Workers Union Nga Ringa Tota Inc [2014] NZCA 516). The Court considered whether the Employment Court had been correct in its interpretation of section 3(1)(b) and whether the answers to the questions on section 3(1)(b) were wrong in law.

Stating that it had been a difficult case to decide, the Court of Appeal said it agreed with the answers given by the Employment Court. However, it said it considered the issue more finely balanced than did the Employment Court.

"That is primarily because we place less weight than the Employment Court did on the Commission report, Convention 100 and the Bill of Rights, and place more weight than the Employment Court did on the enactment and repeal of the Employment Equity Act. Ultimately, our decision to dismiss the appeal has been driven by the language and purpose of the Act itself." [at 236].

TerraNova sought leave from the Supreme Court to appeal. This was declined (TerraNova Homes and Care Ltd v Service and Food Workers Union Nga Ringa Tota [2014] NZSC 196). Given that the Court of Appeal had said the next stage of the proceedings should be the setting of principles under section 9 of the Equal Pay Act, the Supreme Court said it considered the application for leave to appeal to be premature.

The negotiations and the Working Group

In June 2015 Cabinet appointed a Crown negotiator to lead negotiations with employer, employee and funder representatives  to come to an agreed pay equity settlement for the care and support workforce. The objective of the negotiations was to resolve the case outside of court, along with all other outstanding pay equity cases for the caregiver workforce.

In November 2015 the Government appointed a Joint Working Group to recommend principles to Government that provide practical guidance to employers and employees in implementing pay equity. It was also asked to recommend a process for employers and employees to follow to address pay equity, including a bargaining process based on the Employment Relations Act framework.

The 15-member Working Group was proposed by the Government with the agreement of unions and employers, and the unions agreed to put their legal action on hold to enable the Working Group to proceed.

The Working Group reported back in June 2016 and on 24 November 2016 the Government announced that it accepted the Working Group recommendations and it would update the Equal Pay Act and amend the Employment Relations Act 2000 to implement them.

The affected parties and implementation

Parties to the negotiations are the Ministry of Health, ACC, District Health Boards, E Tū, the Public Service Association, and New Zealand Nurses Organisation.

The settlement will be funded mainly through additional funding to Vote Health (an increase of $1.856 billion) and ACC (an increase of $192 million), and the Government says it will not impact on health funding or the provision of frontline health services in other areas. It says ACC levies are set for the coming years, but may possibly increase over the next decade to support it.

"There may also be an increase in costs for people in aged residential care facilities, whose assets keep them above the subsidy threshold. This will be determined through the annual Aged Residential Care contract negotiations," information from the Ministry of Health says.

Further Information

The Ministry of Health has released factsheets for employees and employers which give full details of the settlement and how it will work.