Equal Pay Amendment Bill

Equal Pay Amendment Bill

Government Bill

103—2

As reported from the Education and Workforce Committee

Commentary

Recommendation

The Education and Workforce Committee has examined the Equal Pay Amendment Bill and recommends that it be passed with the amendments shown.

Introduction

The purpose of this bill is to improve the process for employees to raise, progress, and resolve pay equity claims. Pay equity is the principle that work predominantly performed by women should receive the same remuneration as work that may be different, but is of equal value to work done by men. This is different from equal pay claims, the principle of which is that women and men doing the same job should be paid the same.

The bill would amend the Equal Pay Act 1972 to establish a bargaining process for pay equity claims, while still largely retaining the existing processes for equal pay and unlawful discrimination claims.

The bill would also make consequential amendments to the Employment Relations Act 2000 and repeal the Government Service Equal Pay Act 1960.

Our consideration of this bill has been wide-ranging across the policy intent of the bill. We thank submitters for sharing their views and professional and personal experiences with us through their written and oral submissions. Most submitters were supportive of the bill, particularly the low threshold for raising a claim, the lack of a hierarchy of comparators, and the incorporation of the pay equity regime into the existing Equal Pay Act. Some submitters opposed the bill’s overall intent or the use of a bargaining regime, or questioned the bill’s ability to achieve its stated intent.

Proposed amendments

This commentary covers the main amendments we recommend to the bill as introduced. We discuss our proposed amendments in the order they would appear in the bill. We do not discuss minor or technical amendments.

Preliminary provisions

Clause 5 of the bill as introduced would amend section 2(1) of the Equal Pay Act (the interpretation section) by inserting new definitions. We recommend adding definitions for “pay equity claim settlement” and “predominantly performed by female employees”. We discuss the purpose of these proposed new definitions later in our commentary.

Key provisions

Service or experience

Clause 7 would insert new section 2AAC into the Act to prohibit an employer from differentiating, on the basis of sex, between the rates of remuneration for employees. The prohibition would apply both to breaches of the equal pay principle (new section 2AAC(a)) and the pay equity principle (new section 2AAC(b)).

To ensure a pay equity issue is addressed, an employer would need to compare remuneration for work that is predominantly performed by female workers with remuneration for work that would be paid to male employees whose work shares similar criteria. One of the criteria is that the male employees “have the same, or substantially similar, skills, responsibility, and service”.

We consider that the term “service” tends to refer to the duration of time served at work, while “experience” is a broader and more appropriate term that encompasses not just duration of work, but also the quality of prior work experience. We believe “experience” better reflects the intent of the bill. Therefore, we recommend amending new section 2AAC(b)(i) by replacing the word “service” with “experience”.

Timing for selecting a legal avenue

Clause 9, inserting new section 2B, would clarify that if an employee considers they have a pay equity issue, they could choose one of three legal avenues. They are: to raise a pay equity claim under the Equal Pay Act, to make a complaint under the Human Rights Act 1993, or to raise a personal grievance under the Employment Relations Act.

Under the bill as introduced, if a claimant raised a personal grievance with their employer, they would then be barred from pursuing the other two legal avenues.

We think that the initial step of raising a personal grievance claim with an employer should not lock the employee into this avenue, to the exclusion of others. We consider that the employee should only be limited to a personal grievance claim if they were to take the step of lodging a personal grievance with the Employment Relations Authority. We were advised this would be more consistent with the choice of proceedings provisions in the Employment Relations Act and the Human Rights Act.

Therefore, we recommend amending proposed new sections 2B(1)(c) and 2B(5) so that an employee would only be barred from the other two legal avenues if they had applied to the Authority for resolution of a personal grievance.

Pay equity claims

Clause 18 would insert new sections 13A to 13ZF into the Act setting out the process for pay equity claims.

Threshold for who may raise a pay equity claim

Proposed new section 13C(2) provides criteria to determine whether a pay equity claim is arguable.

One criterion is that the work “is predominantly performed by female employees”. The bill as introduced does not explain what the threshold is for deciding this. We are concerned that, without elaboration, “predominantly” will be interpreted by parties and the Authority or Court as a higher threshold than what is intended.

Therefore, we recommend amending clause 18 by inserting new section 13C(2A) to clarify that “predominantly performed by female employees” means work that is currently, or has historically been, performed by a workforce of which approximately 60% or more members are female. We note the inclusion of the word “approximately”, and record that a strict calculation or bright-line test is not intended as a requirement.

We also note that, as introduced, new section 13C(2)(a) would not allow parties to take into account whether an occupation had historically been predominantly performed by female employees, even if it was now evenly split or male-dominated. We consider that an occupation may no longer be predominantly performed by female employees but still be affected by historical sex-based undervaluation. Therefore, we recommend inserting “or was” into new section 13C(2)(a).

Restrictions on who may raise claims

Under proposed new section 13C(4), new pay equity claims could not be raised if there was an existing pay equity claim settlement relating to the employee’s work, and the employer had extended the benefit of that settlement to the claimant. The exception is where the Authority or Court had determined that a new claim may be raised despite such circumstances.

It is unclear in this provision whether the employer must have extended all of the terms of the settlement agreement, such as back pay (if applicable), in order to have extended the “benefit of that settlement”.

It is also unclear whether an employee could raise a pay equity claim if there was an existing pay equity settlement but that employee had not accepted the benefit extended to them.

Therefore, we recommend replacing proposed section 13C(4) as introduced with new sections 13C(4) to 13C(6) to clarify that:

  • An employer choosing to extend the terms of a settlement agreement to other employees who perform work covered by that settlement must offer all of the terms of the settlement (including back pay, if applicable) to the employees who qualify for them, if they wish to bar future pay equity claims by those employees.

  • Other employees (current or future) who perform work that is the subject of a pay equity claim settlement to which the employer is a party could be barred from making pay equity claims under the Act. This would apply where the settlement benefit is offered to the employee, regardless of whether they accept the benefit or not. In the situation where an employee declines the settlement, the employee would still have the right to seek a resolution under the other two legal avenues (the Human Rights Act or the Employment Relations Act). Where an employee accepts the settlement, that employee will have effectively made their choice of proceedings through the pay equity settlement and will not have the right to seek a resolution under either of the other two legal avenues (the Human Rights Act or the Employment Relations Act).

Form requirements and privacy considerations

Proposed new section 13D(1) sets out the written form requirements for a pay equity claim.

We recommend amending new section 13D(1)(c)(i) to include a requirement for an address for service for the employee. We recommend amending new section 13D(1)(c)(iv) to clarify the requirements in situations where an employee has authorised a union or any other representative to engage on their behalf.

Under proposed new section 13D(1)(d), claimants must briefly set out in their written form the elements and their “evidence” for an arguable pay equity claim. As a term used in formal court contexts, “evidence” suggests a more stringent requirement for documentation than what is envisaged in this context. We consider the word “information” more appropriate. We recommend amending new section 13D(1)(d) by replacing the word “evidence” with “information”.

Confidentiality of claimant’s name

Under proposed new section 13E, the employer would be required to give notice to other affected employees that they had received a pay equity claim. In that notice, they could not identify the claimant without their prior written consent. In the case where the employer is consolidating claims, and is issuing a joinder notice, proposed new section 13H as introduced would require the employer to specify a reasonable date by which the employees must request their details are kept confidential.

We consider it would be best to streamline this process and provide employees the explicit choice up front to either consent to sharing their details or request confidentiality.

We recommend inserting new section 13D(c)(v) to require the employee to state in their written pay equity claim whether they consent to their name and address for service being shared. To reflect this, we also recommend amending new sections 13E(4) and 13H(4). In the case of joinder notices, the employer would still be required to provide the opportunity for the employee to request confidentiality under proposed new section 13H(2).

We consider that the privacy concerns of individuals would be appropriately accommodated in this proposed change.

Employer forming view as to whether a pay equity claim is arguable

Default timeframe

Under proposed new section 13F, an employer who received a pay equity claim would be required to decide whether it is arguable as soon as reasonably practicable, and not later than 65 days after receiving the claim. They must also notify the employee of their view about whether the claim is arguable in that timeframe.

We considered whether 65 days (from the date a claim is received) is an appropriate maximum period for the employer to decide whether they consider a pay equity claim is arguable.

First, for consistency across the bill, we suggest expressing the maximum period in working days rather than calendar days. We recommend amending new section 13F to “45 working days”. The result would be similar to 65 calendar days.

We think that a maximum of 45 working days strikes a balance between efficiency and allowing employers sufficient time to make a decision about whether the claim is arguable.

Employer’s right to extend time to decide whether claim is arguable

We expect that, for the vast majority of employers, 45 working days would be long enough to decide whether they consider a pay equity claim arguable. However, we acknowledge that a small number of employers may need more time. We recommend inserting new section 13F(3A) and (3B) to allow employers to extend the time they have to decide whether a claim is arguable, but only if they have genuine reasons based on reasonable grounds. This is intended to be a high threshold, to be used in limited circumstances.

What is reasonable and genuine is highly dependent on the circumstances of each case. If there was a dispute as to the grounds for an extension, establishing what is reasonable and genuine would be determined by the Authority or the Court in each case. However, we note that as this relates only to the initial stage of whether a claim is arguable, we expect there to be limited scope to exercise this right of extension.

Pay equity bargaining process

When parties have established that a pay equity claim is arguable, the bill would provide a bargaining regime to resolve the pay equity dispute.

Matters to be assessed when resolving pay equity issue

Proposed new section 13L(1) sets out factors that the parties must assess to determine whether the employee’s work is undervalued. Proposed new section 13L(2) requires those assessments to be free from gender bias.

The policy intent of the bill is for parties to pay equity bargaining to assess whether work is currently undervalued. However, we note that proposed new section 13L(1) also refers to the parties determining whether work has been historically undervalued. We regard historical undervaluation as a factor to consider when determining whether a pay equity claim is arguable. Once at the pay equity bargaining stage, parties would be required to assess whether work is currently undervalued. Historical undervaluation may be a factor that demonstrates ongoing current undervaluation, though if historical undervaluation was found to have been rectified, no further bargaining would be needed. To clarify this point, we recommend amending new section 13L(1) to remove the reference to determining whether the employee’s work was historically undervalued.

Under clause 24 of the bill, regulations could be made under section 19 of the Equal Pay Act that parties may need to take into account when assessing a pay equity claim. We recommend inserting new section 13L(1)(d) to clarify that parties would be required to take into account any other matters prescribed by regulations made under section 19 of the Act when assessing whether an employee’s work is currently undervalued.

Process free from gender bias

The bill as introduced would allow parties to enter into a written agreement setting out an alternative process to settle the pay equity claim, despite the matters for assessment set out in new section 13L(1) described above. We consider that, should the parties agree to an alternative process, that process must also be free from gender bias. We recommend amending new section 13L(2) accordingly.

Identifying appropriate comparators

Under clause 24 of the bill, regulations could be made under section 19 of the Equal Pay Act which parties may need to take into account when identifying comparable work under new section 13M. Proposed new section 13M specifies types of comparable work that parties could use in identifying appropriate comparators for assessing a pay equity claim. We recommend inserting section 13M(3) to include a requirement to take into account any matters prescribed by regulations when assessing comparators.

Settling pay equity claims

Terms and conditions of employment, including remuneration

During our consideration of the bill, it became apparent that some clarification of the phrases “remuneration” and “terms and conditions of employment” would be useful. We consider that remuneration is an aspect of the terms and conditions of employment, so we recommend amending new section 13N and later sections to use the phrase “terms and conditions of employment, including remuneration”.

Review process required

For claims to be settled through agreement by the parties, a review process needs to be stipulated in the pay equity settlement agreement. A review process helps to ensure ongoing pay equity. The bill as introduced does not expressly require a settlement determined by the Authority to contain a review process. We consider that, for consistency, the Authority’s determinations should be required to contain a review process if one has not been agreed.

We recommend inserting new section 13N(1)(b)(ii)(B) to require that the Authority’s determinations include a review process if parties have not agreed on one. Consequently, we also recommend amending new section 13Z(1)(d) to reflect this.

Summary of method used

New section 13N sets out the requirements of a settlement agreement and the things it must include. We think it would be beneficial if parties were also required to include a summary of the method they used to assess the pay equity claim, and a description of any comparators used. Therefore, we recommend inserting new section 13N(3)(c).

Copy of settlement agreement to be delivered to government department

The bill as introduced does not require parties to forward a settlement agreement to a third party. We think it would be beneficial to have pay equity settlement agreements delivered to the chief executive of the responsible government department (currently the Ministry of Business, Innovation and Employment). The Employment Relations Act requires this for copies of collective agreements. Therefore, we recommend inserting new section 13NA.

We note that the pay equity settlement agreements would not be subject to the provisions of the Official Information Act 1982. This is consistent with the Employment Relations Act in that it recognises the confidentiality of the agreement to the parties involved. In addition, as with collective agreements, the settlements would be used only for statistical or analytical purposes.

Relationship between pay equity and collective bargaining

Proposed new section 13O(2) would clarify that an unsettled pay equity claim between an employee and the employer is not a genuine reason for failing to conclude collective bargaining. We consider that an uncompleted pay equity review would also not be a genuine reason for failing to conclude collective bargaining. Therefore, we recommend amending new section 13O(2) accordingly.

Facilitation

Under proposed new section 13R, any party to a pay equity claim could refer issues to the Authority for facilitation to assist in resolving the claim. Proposed section 13R(2) provides a non-exhaustive list of issues that may be referred to the Authority for facilitation. The list includes a dispute about whether a pay equity claim is arguable (proposed section 13R(2)(a)). Given that the arguable threshold is intended to be a low threshold to proceed to bargaining, we do not see facilitation as a mandatory step for resolving disputes before accessing a determination.

We recommend amending proposed new section 13R to require all parties’ agreement to refer a dispute about whether a pay equity claim is arguable to the Authority for facilitation. We note that the option of mediation over that issue would still be available.

We also recognise that facilitation may not be a necessary step for resolving all disputes for pay equity. We recommend removing the requirement for the Authority to direct parties to facilitation when considering an application for determination in proposed new section 13Z(2)(c). With this amendment, the Authority would have discretion over whether it directs parties to facilitation before investigating the matter itself.

However, in the case where the Authority is asked to decide whether a claim is arguable, we recommend amending proposed new section 13Z(2A) so that the Authority would not have any ability to direct parties to facilitation.

Limitation periods for back pay

Proposed new section 13ZD specifies time periods for the recovery of remuneration for past work, frequently referred to as back pay. We do not propose any substantive changes to these periods, but recommend the insertion of examples into new section 13ZD to assist in the interpretation and application of the sections. These examples are for illustrative purposes only.

General provisions

Notices

In the bill as introduced, “notice” is defined four separate times. For ease of reference, we propose combining the four provisions into one notice provision. Therefore, we recommend deleting proposed new sections 13D(2), 13E(5), 13F(7), and 13I(5). In clause 20, we recommend inserting new section 14A which provides requirements for “notices”.

Penalties

Under the bill as introduced, the Labour Inspectorate could bring an action with the Authority against an employer to recover a penalty under new section 18. The current role of the Labour Inspectorate is to enforce minimum employment standards, and does not generally take penalties for breaches that are not related to minimum employment standards. Therefore, we propose removing the Labour Inspectorate’s power to bring an action with the Authority to recover penalties in relation to pay equity by inserting new section 18(2A)(b). However, to ensure the Labour Inspectorate retains its powers in relation to equal pay and unlawful discrimination claims as they currently stand, we recommend inserting new section 18(2A)(a).

We recommend inserting new section 18A(4A) to require the Authority to take into account previous improvement notice default by a person when determining a penalty.

Transitional provisions

New schedule 1 would discontinue existing pay equity claims under the Equal Pay Act and the Government Service Equal Pay Act. The exception to this is where existing pay equity claims have had a determination made before the enactment of this bill. We were advised that the Crown Law Office was consulted in developing the transitional provisions.

Existing claimants would be able to resolve their existing pay equity issue by raising a new claim under the new regime that would be created by this bill. Alternatively, they would be able to transition their existing claim to the new regime (without raising a new claim) and continue bargaining by entering into a written pay equity bargaining agreement with the employer before the enactment of this bill.

In the latter situation, the pay equity bargaining agreement would set out the process to be followed to reach a pay equity settlement. However, we recommend amending clause 3(1) in new schedule 1 to clarify that a pay equity bargaining agreement must contain a statement that the parties consider the pay equity claim arguable.

In proposed new schedule 1, we recommend inserting definitions for “existing equal pay claim” and “existing unlawful discrimination claim” to distinguish these from the pay equity claims.

We recommend inserting clause 6 into new schedule 1 to clarify that existing equal pay claims and unlawful discrimination claims are to be determined in accordance with the provisions of the Act at the time the claims were lodged.

The bill would repeal the Government Service Equal Pay Act. We recommend amending new schedule 1 to ensure that any pay equity claim under that Act that has been filed with the Authority or Court would be considered to be an “existing pay equity claim” that would be discontinued by the bill’s enactment.

Consequential amendments to the Employment Relations Act

New schedule 2 would amend the Employment Relations Act. As mentioned, we consider that incomplete pay equity reviews are not a genuine reason for failing to conclude collective bargaining. Therefore, we recommend amending proposed new schedule 2 to insert new sections 33(2)(c) and (d) into the Employment Relations Act.

Appendix

Committee process

The Equal Pay Amendment Bill was referred to the committee on 16 October 2018. The closing date for submissions was 28 November 2018. We received and considered 596 submissions from interested groups and individuals. We heard oral evidence from 41 submitters at hearings in Wellington and Auckland.

We received advice from the Ministry of Business, Innovation and Employment and the Ministry for Women. The Regulations Review Committee reported to the committee on the powers contained in clause 24.

Committee membership

Dr Parmjeet Parmar (Chairperson)

Simeon Brown

Hon Clare Curran (from 24 October 2018)

Hon Nikki Kaye

Denise Lee

Marja Lubeck

Jo Luxton

Mark Patterson

Jamie Strange (until 24 October 2018)

Chlöe Swarbrick

Jan Tinetti

Nicola Willis

Hon Scott Simpson participated in the consideration of this bill