Pay Equity
This week the Equal Pay Amendment Bill 2025 was passed under urgency.
The legislation was passed with the support of the three coalition parties at 7.45 pm on 7 May 2025. This follows the bill’s introduction and announcement on Tuesday, 6 May 2025. The Minister for Workplace Relations and Safety, the Honourable Brooke van Velden, announced the legislation was being introduced to make pay equity claims ‘more robust, workable and sustainable’.[1] The predominant effect of this legislative change to the pay equity process is to raise the threshold for a pay equity claim to advance.
The legislation
The Equal Pay Amendment Bill 2025 (the 2025 Bill) amends the Pay Equity Act 1972 (the Act). However, the 2025 amendment bill relates mostly to changes introduced to the Act in the Equal Pay Amendment Act 2020 (the 2020 Act). Before the landmark case of Terranova Homes & Care Ltd v Service and Food Workers Union Nga Ringa Tota Inc,[2] the Act had only been used to assess claims that men and women were being paid unequally for similar work within the same workplace. The Court of Appeal found the Act allowed claims that female-dominated work was being underpaid in comparison to substantially similar jobs in different sectors. Following this decision, two tripartite government working groups were set up, and the 2020 Act was passed to set out guidance on how to assess and resolve claims involving work from different sectors. The 2020 Act passed with unanimous support in parliament, including from the National Party and New Zealand First.
The 2025 amendment
The following are key tenets of the pay equity process that have been changed by the 2025 Bill:
- Previously, to advance a pay equity claim to the pay equity bargaining process, the applicants needed to establish there was an ‘arguable’ claim that the work was currently or historically undervalued and was performed by women. This has been modified so the claim is required to have ‘merit’. This means there must be reasonable grounds to believe the work has been historically undervalued (and continues to be undervalued). The threshold for a claim to advance is now higher.
- Under the 2025 Bill, in order to prove work is predominantly performed by female employees, claimants will need to establish the workforce has 70% or more female members and has done so for 10 consecutive years. Previously this threshold was only 60% or more members of the workforce having ever been female.
- Previously, employers could only give notice discontinuing a claim if they did not consider there was an arguable case the claim relates to female-dominated work that is or has been historically undervalued. Under the new legislation, employers can give notice that discontinues the claim if they consider the comparator workforce selected for the claim is not appropriate.
- The purpose of the Act has been changed from there being a ‘low threshold to raise a claim’ to a requirement for ‘evidence of systemic sex-based undervaluation’ to raise a claim.
- An amendment has been added that allows parties to agree any increases in remuneration that result from a pay equity bargaining process can be phased.
- Review clauses in settled claims are no longer enforceable. The 2025 Bill instituted a 10-year bar on pay equity claims being raised about employees and work that has already been settled.
An important result of this legislation is all current pay equity claims (there were 33 pay equity claims at the introduction of the 2025 Bill) have been discontinued. New claims can be raised, but only under the new requirements.
Comment
The retrospective nature of the 2025 Bill and the fact it was passed under urgency has left supporters of the original process stunned. Opponents are concerned with the Government’s decision not to undertake public consultation given years of case law development and two separate working groups that lead to the 2020 Bill.
The discontinuation of claims which had been significantly advanced following the 2020 Act has resulted in claims being back to square one, regardless of the amount of work parties had put into the process.
Assistance
If you or your business needs advice regarding any of the recent legislative changes or need advice on a specific situation, our lawyers are here and happy to assist you. Talk to a member of the Dyhrberg Drayton Employment Law team today!
Lachlan Spence, Lawyer and Jordan Boyle, Partner
[1] Minister for Workplace Relations and Safety, ‘Changes to improve pay equity process’ (6 May 2025) https://www.beehive.govt.nz/release/changes-improve-pay-equity-process.
[2] Terranova Homes & Care Ltd v Service and Food Workers Union Nga Ringa Tota Inc [2014] NZCA 516.
