Mai Chen: A win for low-paid women everywhere

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The Court of Appeal's decision in Terranova Homes & Care Limited v Service and Food Workers Union Nga Ringa Toa Incorporated and Anor is important for all female-intensive occupations. It also raises questions about the sort of intervention we want, and can afford, to remove and prevent sex-based discrimination in the rates of pay for males and females.

The key issue was whether Terranova Homes & Care failed to provide equal pay to its female (and male) caregivers because they were paid a lower rate of pay than would be the case if the work was not predominantly performed by women. In particular, the Court of Appeal looked at whether the Equal Pay Act 1972 provides for pay equity (equal pay for work of equal value) or whether it is limited to requiring equal pay for the same or substantially similar work.

The Employment Court reached the preliminary conclusion that the Act is not limited to providing equal pay for the same or similar work. The case ultimately turned on the interpretation of section 3(1)(b) of the Equal Pay Act 1972, which provides that when work is "exclusively or predominantly performed by female employees", for the purposes of "implementing equal pay", the key criterion is "the rate of remuneration that would be paid to male employees with the same, or substantially similar, skills, responsibility, and service performing the work under the same, or substantially similar, conditions and with the same, or substantially similar, degrees of effort".

In other words, what would a hypothetical man be paid to do the same job?

The Employment Court held that when working out what a hypothetical man would be paid to do the same work as a woman, it can take into account systemic undervaluation of the work derived from current or historical structural gender discrimination and rates of pay to males in other industries, if other employees in the same or similar enterprise, industry or sector would be an inappropriate comparator group.

The Court of Appeal upheld the Employment Court's conclusions, although it was critical of aspects of its reasoning. It was also critical of the Act.

There is now a prospect that the court could (once the matter has progressed to a full hearing) order wage increases for low-paid female workers.

The Prime Minister has said the Government is working through the implications. If the Government were to decide the fiscal or business implications of the Court of Appeal's interpretation were too great, it would have the numbers to change the law such that the Equal Pay Act only guaranteed equal pay and not pay equity.

But changing the law might raise the public policy debate about research showing a statistical link between female dominance in an occupation and low pay rates, and the need for an Employment Equity Act such as that enacted in 1990.

That Act included both pay equity and equal opportunity provisions, and was repealed within three months when the government changed to National.

On the other hand, the appellants pointed out it would be unjust to require employers to "shoulder the burden of rectifying society-wide structural discrimination" and to undertake assessments that are simply beyond their expertise and resources.

Even though the appeal in the Terranova case looked at the Employment Court's response to preliminary questions, the large number of interveners in the case illustrates its importance.

The decision is likely to be appealed to the Supreme Court. Even if it is upheld, it is not clear how the Employment Court will carry out equal pay inquiries.

The Court of Appeal has left issues of workability to the Employment Court to resolve. The Employment Court could find itself effectively setting salaries, or acceptable salary ranges, across a range of sectors. That is why this case matters.

• Mai Chen is a partner at Chen Palmer, public and employment law specialists