Legislation amending Equal Pay Act passed through parliament quickly
On 6 May, the Government announced a sudden overhaul of the pay equity regime under the Equal Pay Act 1972 (Act), to make the process of raising and resolving pay equity claims more robust, workable and sustainable.
Workplace Relations Minister Brooke van Velden stated: “It is clear the current Act is not working as intended, and amendments made by the previous government in 2020 have created issues. Claims have been able to progress without strong evidence of undervaluation and there have been very broad claims where it is difficult to tell whether differences in pay are due to sex-based discrimination or other factors.”
A Bill was introduced to amend the Act, went through parliament without any select committee scrutiny, and took affect the day after Royal Assent – which came one week later, on 13 May!
The Act has been a cornerstone of New Zealand’s employment landscape, designed to ensure that employees receive equal remuneration for the same or substantially similar work. At its core, the legislation aims to eliminate gender-based wage discrimination in both the public and private sectors.
Previously, employees or unions could raise a pay equity claim if it was merely arguable. The amendment now requires the claim to have “merit” supported by evidence of current and historical undervaluation and the work must have been at least 70 per cent female dominant for 10 years.
The changes also propose a clearer structure for assessing claims, including a hierarchy of comparators. According to the Cabinet Paper, priority must be given to comparators employed by the same employer. If none are appropriate, comparators from similar employers may be used, followed by those within the same industry or sector. If there is no comparator within that group, the pay equity claim will not proceed.
Comparators from different industries or sectors are excluded because when using a comparator from a different industry or sector it may be too difficult to determine whether differences in remuneration are due to sex-based discrimination or due to non sex-based factors. Additionally, factors such as workforce size can be grounds for excluding a comparator, and if no suitable comparator exists within the hierarchy, the claim cannot proceed.
The changes will apply retroactively to any existing pay equity claim that has not settled. This is a very unusual approach. The Minister has acknowledged that this is inconsistent with the general principle against retroactive application of legislation. The concern is that there could be a large number of claims filed and potentially determined under the current Act. The Minister has noted that this is likely to be contentious and receive public comment from stakeholders.
Minister van Velden announced that there will be a better framework and guidance for parties to use to assess whether there is sex-based undervaluation, branded as being more sustainable and evidence based, departing from the typical framework seen in collective bargaining under the Employment Relations Act 2000.
The Minister highlighted that this would be a significant cost saving to the Crown ahead of the much-anticipated budget delivered on 22 May 2025, given that the costs of all settlements to date have cost $1.78 billion per year.
We will be watching developments closely and will share updates on this.
Bronwyn Heenan is a Partner at Simpson Grierson in Wellington, specialising in employment and health and safety law. John Rooney is a Partner at Simpson Grierson in Auckland, specialising in employment and health and safety law. Phillipa Muir is Chair of Simpson Grierson in Auckland, specialising in employment law. Rachael Judge is a Partner at Simpson Grierson in Auckland, specialising in employment and education law. Rebecca Rendle is Head of the Employment National Practice Group at Simpson Grierson in Auckland. Thanks to Ella Rainthorpe and Clara Evans for their assistance in writing this article.
