New Zealand Law Society - Court of Appeal weighs in on pay equity

Court of Appeal weighs in on pay equity

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The Court of Appeal has issued a landmark judgment considering the provisions of the Equal Pay Act 1972 (Act): Terranova Homes and Care Ltd v Service and Food Workers Union Nga Ringa Tota Inc [2014] NZCA 516.

The appeal related to a preliminary judgment of the Employment Court from August 2013 which considered pay equity in the scope of the aged care.

Both the Employment Court and Court of Appeal judgments have indicated that the outcome of the case has “potentially far reaching implications, not only for the residential aged care sector, but for other predominantly female-intensive occupations as well”.

This case involves a claim by the Service and Food Workers Union Nga Ringa Tota (Union) that a group of female caregivers employed by Terranova Homes and Care Limited (Terranova) received a lower rate of pay than they would have if the majority of employees were male, and that this was unfair and in breach of the Act.

Court of Appeal

The Employment Court found that in order to assess whether a breach of the Act had occurred in a female intensive industry, it would be necessary, and within the scope of the Act (and other legislation and international law obligations), to use external employers and industries as comparators in determining what a notional male employee with similar skills and responsibilities would be paid.

The Court of Appeal, in its 28 October decision, agreed with the Employment Court’s finding. However, in coming to its decision the Court of Appeal noted the Employment Court placed too much weight on the Bill of Rights Act 1990 and New Zealand’s international law obligations. The Court of Appeal’s focus was on interpreting the Act (which it noted was not well drafted). The judgment considered:

  • the necessity to account for the systematic undervaluation of some work which has traditionally been performed by women, and as a result undervalued, and paid at lower rates than male employees would have been paid;
  • whether it was sufficient for an employer to claim there is pay equality based solely on a small male proportion of the workforce being paid the same as the female employees. It held that this was not sufficient alone and does not protect against the gender bias undervaluing which may have been applied to the role;
  • the necessity to be able to look outside a female-intensive industry in order to properly ascertain what a notional male performing that role would be paid based on skills and similarities of duties where there is no appropriate comparator within the industry; and
  • the challenges that may be faced in considering external comparators, including finding appropriate comparator industries, and accessing sufficient information and evidence of pay scales to inform the comparison. The Court accepted these were valid difficulties. However, it held that these difficulties would be significantly mitigated by the Employment Court making use of its s 9 power to state the principles to be observed for the implementation of equal pay challenges prior to the substantive hearing to act as guidelines.

Next steps

The case was referred back to the Employment Court for it to state the principles (under s 9) that should act as a framework for the hearing of the substantive case. The statement of principles should:

“provide the Employment Court and the parties with a workable framework for the resolution of Ms Bartlett’s claim … The Court may for example in its statement of principles identify some appropriate comparators and guide the parties on how to adduce evidence of other comparator groups or issues relating to systematic undervaluation.” [239]

This is a case of watch this space to find out how the external comparators will be chosen, and how evidence can be adduced from them regarding skills and remuneration of their employees.

What does this mean for employers?

The Court of Appeal has confirmed the broad approach that will be applied to assessing pay equity. Employers should pay particular attention to ensure gender equality in setting remuneration and other key terms and conditions.

For those industries with a largely female workforce (for example nursing and teaching), it is worth undertaking an assessment of comparable male-dominated industries to provide objective material against which to assess any risks the organisation may have in relation to the Act.

Rachel Burt is a senior associate with the employment practice of Kensington Swan. Tessie von Dadelszen was, until recently, a solicitor with the firm.

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