Pay equity changes under intense scrutiny

Otago Daily Times

16-05-2025

The government's recent reforms of pay equity legislation have certainly stirred up a hornets' nest.
It has defended the rushing through of these reforms to provide legal certainty on claims involving women's pay.
However, opponents have claimed it is to achieve crucial savings as Budget day looms. David Seymour claims that Brooke van Velden has "saved the Budget" for the government. Ms Van Velden's Cabinet paper claims settlements under the current regime were costing the government $1.55 billion a year.
The changes will discontinue 33 pay equity claims involving hundreds of thousands of workers.
So, let us have a look at the history of the legislation and the changes proposed. How did pay equity come about?
Kristine Bartlett was an aged care worker for Terranova Homes. In 2012 she brought a claim through E Tū that she had been on low pay for 20 years because her work in aged care was predominantly performed by women.
The case went to the Supreme Court, with the court agreeing that anyone who does "women's work" can make a pay equity claim under the Equal Pay Act.
The government agreed to a $2b settlement and to fund 20%-40% pay increases for care workers over the following five years.
A joint working group with unions, businesses and officials was established to agree on a set of pay equity principles. The Equal Pay Amendment Act was passed in 2020. What was the process?
The legislation required employers to make sure there was no pay differentiation on the basis of sex where work was predominantly performed by female employees.
The legislation looked at factors such as same or substantially similar skills; responsibility; experience and work under the same or substantially similar conditions, with the same or substantially similar degrees of effort.
Where an employee did not think this obligation was being met, they could raise a pay equity claim. The claim would be considered arguable if it related to work that was predominantly performed by female employees and the work was currently undervalued or had historically been undervalued.
The parties were then required to undertake an assessment to determine whether the work was undervalued on the basis of sex. That analysis included an assessment of the nature of the work to which the claim related; the nature of comparators, including skills, responsibilities, conditions of work, degree of effort, level of experience and any other relevant features, together with the terms and conditions of employment.
If undervaluation was established, the parties were required to settle the claim by agreeing on remuneration that did not differentiate on the basis of sex.
While the government has claimed that the system was unworkable, the legislation provided for assistance by way of Mediation Services, Employment Relations Authority facilitation and, ultimately, determination by the Employment Relations Authority. So, what are the changes?
The changes announced, after being pushed through under urgency, result in 33 claims having to start again. This retrospective implementation of the amendments has been highly criticised.
The changes include:
— raising the threshold of "predominantly performed by female employees" from 60% to 70% and requiring that this has been the case for at least 10 consecutive years;
— restating the purpose of the legislation as providing a process that facilitates the resolution of pay equity claims where there is evidence of systemic sex-based undervaluation of work that is predominantly performed by female employees;
— amending the threshold for raising a claim from "is arguable" to "has merit";
— employers may opt out of a multi-employer claim without having to provide reasons based on reasonable grounds for doing so. This decision cannot be challenged;
— introducing a hierarchy of comparators and adding more prescription to comparison methodology;
— providing for phasing of pay equity settlements;
— removing the provision for the Employment Relations Authority to award back pay;
— introducing a 10-year limit on claims being reintroduced relating to the same employees or workforce. Public vs private sector
Business New Zealand chief executive Katherine Rich has agreed changes were needed and that the previous claims were creating large anomalies between public and private sectors.
"Increases in public health sector remuneration have created difficulties in the private sector where they can't afford those pay rates.
"Where those private sector employers receive government funding for some services, it is not enough to cover the contracted services they provide. As a result, they are losing staff, suffering from industrial action and face problems in delivering their contracted work."
In one LinkedIn post Ms van Velden stated:
"Pay equity is also here to stay. This is the concept that men and women doing different jobs of the same value should be paid the same. This is different from equal pay and more subjective. Because it's more subjective, there needs to be a system to figure out value and undervaluation, and whether this undervaluation is because of discrimination based on sex."
Whether the changes are designed to save the Budget for the government or to provide legal certainty on claims involving women's pay, the opposing cry that this is "a war on women" is not likely to quieten any time soon.
— John Farrow is a partner with Anderson Lloyd, specialising in employment law. The opinions expressed in this article are those of the writer and do not purport to be specific legal or professional advice.