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New Zealand: Government and Care Workers Reach Pay Equity Settlement

(Apr. 21, 2017) On April 18, 2017, the New Zealand government announced that a settlement had been reached with workers in the government-funded service sectors of aged and disability residential care and home and community support services that will result in pay increases of between 15 and 50% for those workers. (Press Release, Jonathan Coleman, $2 Billion Pay Equity Settlement for 55,000 Health Care Workers, BEEHIVE.GOVT.NZ (Apr. 18, 2017); Govt Settles Historic Pay Equity Case, RNZ (Apr. 18, 2017).)

Court Case Brought by Care Workers

The settlement follows court decisions in a case involving a pay equity claim brought against a rest home operator by the Service and Food Workers Union (now called E Tu) on behalf of a care worker and several other union members. (Id.) The union essentially argued that pay rates in the aged care sector were less than what would be offered if the employees worked in a male-dominated industry. The Employment Court agreed, ruling in 2013 that the low hourly pay rate of care workers employed by the defendant was a result of gender discrimination and that the Equal Pay Act 1972 was applicable. (Service and Food Workers Union Nga Ringa Tota Inc [2013] NZEmpC 157 (22 August 2013), NZLII website; Equal Pay Act 1972, New Zealand Legislation website.) The Court of Appeal upheld the finding that the Equal Pay Act 1972 could apply to pay equity, and the Supreme Court did not grant leave to appeal. (Terranova Homes & Care Limited v Service and Food Workers Union Nga Ringa Tota Incorporated [2014] NZCA 516 (28 October 2014); Terranova Homes v Services and Foodworkers Union [2014] NZSC 196 (22 December 2014), NZLII website.)

Working Group on Pay Equity

The government subsequently established a joint working group on pay equity, involving representatives of unions and employers, that was tasked with recommending “agreed principles on pay equity that could be applied in all sectors of the economy.” (Press Release, Paula Bennett & Michael Woodhouse, Working Group to Pursue Pay Equity Principles for Workplaces, BEEHIVE.GOVT.NZ (Oct. 20, 2015).) The working group reported back to the government in 2016, and its recommendations were subsequently accepted. These included

  • principles to provide guidance to employers and employees in identifying, assessing and resolving pay equity claims; and
  • a process for employers and employees to follow to address pay equity, including a bargaining process based on the Employment Relations Act framework. (Press Release, Paula Bennett, Michael Woodhouse, & Louise Upston, Govt Accepts Recommendations on Pay Equity, BEEHIVE.GOVT.NZ (Nov. 24, 2016); Employment Relations Act 2000, New Zealand Legislation website.)

The government also decided to supplement the recommendations in order to “clarify how to choose an appropriate job for comparison when making a pay equity claim.” (Press Release, Bennett, Woodhouse & Upton, supra.) Changes are needed to the Employment Relations Act 2000 and the Equal Pay Act 1972 in order to implement this approach and the working group’s recommendations. (Id.)

A draft of the Pay Equity Bill was released for public consultation on April 20, 2017.  (Press Release, Michael Woodhouse, Pay Equity Bill Released for Consultation, BEEHIVE.GOVT.NZ (Apr. 20, 2017).) The Minister for Workplace Relations and Safety, Michael Woodhouse, stated:

Currently, the Equal Pay Act is not equipped to provide guidance on pay equity claims and needs to be updated to provide for a practical and fair process for employees to follow if they feel they are not being paid what their job is worth due to gender discrimination. The draft Bill also provides principles for, and gives guidance on, how to choose comparable jobs and roles to judge Pay Equity claims.  (Id.)

Settlement with Care and Support Workers

At the time it established the working group, the government also stated that it would negotiate over the pay rates for care and support workers.  (Press Release, Bennett & Woodhouse, supra.)  The settlement resulting from the negotiations with the relevant unions affects about 55,000 predominantly female workers, 20,000 of whom are currently paid at the minimum wage rate of NZ$15.75 (about US$11.06) per hour.  Under the settlement,

A care and support worker on the minimum wage with three years’ experience and no qualifications will receive a 27 per cent increase in their hourly wage rate moving from $15.75 to $20 per hour from July 1. That rate would progressively increase to $23 by July 2021 and would rise further if they attain a higher qualification. (Press Release, Jonathan Coleman, supra.)

The settlement will cost the government NZ$2.048 billion (about US$1.439 billion) over the next five years, which will primarily be funded by an increase in the budget allocated to the health sector, although there “may also be an increase in costs for people in aged residential care facilities, whose assets keep them above the [government] subsidy threshold.”  (Id.)  Legislation will be introduced to “ensure the pay rises happen in the agreed manner.”  (Id.)

Reactions to the Settlement

The association that represents operators of most estabresidential care facilities for the elderly in New Zealand, including the operator that was subject to the original claim, issued a statement welcoming the settlement, saying that the “case has cast a dark shadow of uncertainty across the industry for several years now and a resolution is most welcome.” (Press Release, New Zealand Aged Care Association, NZ Aged Care Association Welcomes Pay Settlement for Caregivers (Apr. 18, 2017).)  It acknowledged the original plaintiff in the case, as well as the defendant, and gave the government credit “for its willingness to confront this issue and so avoid a lengthy Court case.” (Id.)  The chief executive of the association stated,”[t]oday’s settlement creates the right pay and conditions for caregivers and is a game changer in a sector that has traditionally struggled to attract New Zealanders into these roles.”  (Id.)

The chief executive of BusinessNZ, which advocates for the interests of businesses in the country, said that “businesses would need to learn how to address potential pay gap claims, because it was the fair thing to do,” adding that it would be critical for payment time frames to be put in place so that businesses are not bankrupted in the process.  (Govt Settles Historic Pay Equity Casesupra.)

The assistant national secretary of E Tu, the union that represented the original claimant, said in a joint statement with other unions that the settlement will mean a “once in a lifetime pay rise which will end poverty wages for this mainly female workforce and set them on the path to a better life.”  (Press Release, E Tu, Historic Day as Caregivers Offered Equal Pay Settlement (Apr. 19, 2017).)