Thanks to a good friend in Australia my attention has been drawn to a recent landmark decision of the Fair Work Australia tribunal, the national workplace relations tribunal.
• the safety net of minimum wages and employment conditions
• enterprise bargaining
• industrial action
• dispute resolution
• termination of employment
• other workplace matters.
On February 1, 2012 a full bench decision was issued and it can be viewed or downloaded by clicking here.
South Africa has a requirement in section 27 of the EEA for the elimination of disproportionate income differentials and the proposed amendments to the EEA will include ‘unfair discrimination’. See the earlier blog
Employment Equity Act amendments: Employers to be punished not encouraged
Although vice president Watson was in the minority I found his remarks about the difference between claims for ‘comparative wage justice’ and ‘equal pay’ very interesting and informative.
Set out below is the entire dissenting opinion with footnotes omitted and emphasis added.
DISSENTING DECISION OF VICE PRESIDENT WATSON
INTRODUCTION
[83] I am respectfully unable to agree with the conclusion of the other members of the Full Bench expressed in paragraphs 62–73 of the majority decision. In my view the applicants in this matter have failed to establish that the salary increases sought are consistent with the legislative provisions under which the application has been made.
[84] The case is unprecedented by reference to international equal pay cases. It does not seek equal pay for men and women in a single business, or in an industry. Rather, it seeks to establish a large minimum overaward payment for all men and women in the entire SACS industry to a level approaching public sector wage levels. It has more in common with a case based on comparative wage justice than equal pay. In my view the applicants have failed to establish key ingredients of their claim. In particular, it has not been established that:
• the public sector is an appropriate equal remuneration comparator,
• the wage gap between the not-for-profit SACS industry and the public sector is primarily due to gender-based undervaluation, and
• it is appropriate to effectively extract the entire SACS industry from the enterprise bargaining framework of the Act for the foreseeable future.For these reasons the claim should be rejected.
[85] The approximately 150 000 employees covered by this application are employed to assist the most vulnerable members of Australian society. The employers—approximately 4000 mostly small not-for-profit organisations—had their origins in voluntary charity work and still perform a significant amount of their work through volunteers. Employees covered by the modern award are primarily engaged in the delivery of services funded by governments. Governments previously conducted many of these services themselves but have moved the delivery of the services to the not-for-profit sector because it was considered that the not-for-profit sector could deliver the services in a more efficient and cost-effective manner. The employers are therefore heavily reliant on government funding for the programs in which employees are engaged.
[86] It is indisputable that employees in the SACS industry deserve more recognition and reward for the work they undertake. It is also indisputable that the organisations that deliver the services deserve to be funded in a manner that enables them to attract, retain and fairly reward qualified employees to perform the valuable services to those most in need. These factors clearly have strong emotional appeal and might have been relevant if broad arbitral discretion was available. However, the factors are not relevant to the primary statutory test Fair Work Australia is required to apply in relation to this application.
THE NEED FOR A CAREFUL AND RIGOROUS APPROACH
[87] The application is to make an equal remuneration order which is only available if it is established that there is not equal remuneration for men and women workers who perform work of equal or comparable value. The applicants have not sought to make comparisons between women’s pay and men’s pay. They have consistently sought to make comparisons between levels of pay in the SACS industry and the rates paid to government employees who perform similar work. The highly unusual nature of this case highlights the need for very careful scrutiny of all elements of the case.
[88] In the May 2011 decision, the Full Bench found that gender is an important influence on the level of wage rates in the SACS industry and required the parties to make further submissions on the extent to which wage rates in the SACS industry are lower than they would otherwise be because of gender considerations. This task requires an adjudication as to the extent of gender-based undervaluation in the SACS industry. The application also requires a consideration of various discretionary factors which might bear upon the making of an order. It is imperative that a careful and rigorous analysis is applied to these tasks. The test must be clear, the conclusion must be based on accurate findings and all relevant circumstances must be taken into account.
[89] Equal pay for men and women employees performing equal or comparable work is recognised as a fundamental right by major human rights instruments and the International Labour Organization. Legislative remedies exist in various jurisdictions including the European Union, the United Kingdom (UK), the United States of America (US) and Canada. In the United Kingdom, despite legislation existing for about 35 years, the number of new applications has increased markedly in recent years. In 2004–05, 8229 new applications were made. This increased to 44 013 new equal pay applications in 2006–07. The increase in applications has led to the time taken for determining applications increasing to up to 8–10 years. Of the 20 148 applications determined in 2008–09, 36 were successful. Of the 20 100 determined in 2009–10, 20 were successful.
[90] The UK experience highlights the potential for increased equal pay litigation in Australia. To the extent that the claims in the UK are valid, they disclose practices at the workplace inconsistent with legislation and contemporary community standards. To the extent that claims are not valid, they represent an attempt to misapply a legitimate legal remedy. To the extent that the number of applications arises from uncertainty as to the nature of obligations and remedies available it is a sad indictment on those responsible for the laws and their application. In the light of this experience, it is not inconceivable that an increased number of equal pay claims will be made in Australia if, arising from this case, there is ambiguity and uncertainty as to the nature of claims that can be made, the nature of the test to be applied and the findings necessary for a successful case.
[91] In Australia, the concept of equal pay has a long history and is universally supported. However, as outlined in the May 2011 decision, previous attempts to obtain equal remuneration orders under the federal legislation have been unsuccessful because of the failure of the applicants to demonstrate that the rates of remuneration arise from discrimination based on gender. There have since been changes to the legislative provisions. For example, as noted in the May 2011 decision, the explanatory memorandum to the Act states that the requirement to demonstrate discrimination as a threshold issue has been removed. Nevertheless, the task of determining whether there is equal remuneration for men and women workers for work of equal or comparable value remains the fundamental requirement for any order.
[92] The context of the application and the nature of wage fixing in Australia also emphasises the need for a careful and rigorous approach. Since the 1990s the focus for fixing actual wage rates has been through a process of enterprise bargaining. Arbitration of wage rates has been limited to the rates contained in minimum rates awards, which each have a work value relationship with other rates in all other minimum rates awards, and very rarely, arbitration when industrial action over enterprise bargaining causes significant damage to the economy. Even when arbitration was more generally available, comparative wage justice was a discredited concept. It was considered that there was nothing anomalous in differences in pay and that comparisons with other groups of employees could not amount to a merit justification for a wage increase.
[93] The applicants are effectively seeking the arbitration of actual rates of pay for the entire SACS industry. The application is based on the concept of equal remuneration aimed at delivering significant wage increases utilising comparisons with wages paid to public sector employees. Media reports have quoted the ACTU as suggesting that the May 2011 decision will help establish a standard for other industries and is a milestone in seeking wage justice for women in all lines of work across Australia. Despite the submissions of the ACTU to the contrary, it is also obvious that the ultimate result will be an important element of the precedent established by the case, especially if, as proposed by the majority, the original claim is granted in full.
[94] These circumstances demonstrate the need for a careful and rigorous approach. Once such an approach is adopted, it is clear, in my view, that the applicants have failed to establish that the rates they seek are justified or appropriate having regard to both the legislative test and the application of discretionary factors. I turn to the reasons for this conclusion.
THE ABSENCE OF A LEGITIMATE COMPARATOR
[95] On any view various aspects of the claim are highly unusual. An equal remuneration order is sought for both men and women workers. Unlike the remedies available in the UK which require comparisons of relative payments to men and women within a single business, the order is sought across multiple employers for their entire male and female award-covered employees.
[96] Not only is no comparison sought to be made with male employees employed by the same employer—no comparison is sought to be made with male employees of any other employer. The comparison that is sought to be made is with public sector employees who perform similar work. As with SACS industry employees, those employees are also primarily female. It is asserted that the pay of government employees is not subject to gender undervaluation. However, despite raising concerns as to the appropriateness of public sector comparisons in the May 2011 decision, no reliable analysis has been provided of the inherent differences which exist between industries and different employers or the factors which might otherwise explain the reason for the differences in rates of pay.
[97] The UK case law is replete with analysis of the reasons for differences in pay because no breach of equal pay obligations arises where the pay practice is explained by objectively justified factors not related to gender. The concept is that differences in pay, even within a single business, can and do exist for all types of legitimate reasons. A remedy is only available if the difference is because of gender. As I have noted above, differences in pay between employers, let alone between industries, are beyond the scope of UK equal pay laws, apparently because differences in pay between employers are regarded as entirely legitimate in a market economy. Similar limitations exist under US statutes such as the Equal Pay Act of 1963.
[98] In both the UK and US jurisdictions, it is a defence to show that differences in pay are for reasons other than gender. In the case law in both jurisdictions, courts and tribunals examine the reasons for differences in pay in great detail. A remedy can only be granted to the extent that differences in pay are found to be for reasons tainted by gender. The House of Lords has warned that without a reliable comparator and without confining the equal pay remedy to differences because of gender, the equal pay legislation could be called into operation whenever mixed groups of workers are paid differently. Questions of appropriate comparators and causation are important aspects of the case law in other jurisdictions. An inappropriate comparator or an alternative justification for a difference in pay is fatal to an equal pay claim. In Australia, the High Court has emphasised the need for a careful approach to issues of causation in anti-discrimination laws and applied relevant English authorities. A similar approach is required in this matter.
[99] This international perspective and considerations of logic require the claim in this matter to be based on the establishment of a reliable benchmark or comparator and the elimination of any factors not related to gender from any comparisons that can legitimately be made. If a benchmark is sought to be utilised, it must be reliable. It must constitute equal or comparable work in every respect. Generalised comparisons of work between industries are insufficient. Comparable roles must be fully assessed against work value criteria. Remuneration for comparable roles must not contain additional elements such as the inevitable differences in pay between employers and between different industries or superior bargaining outcomes that generally arise in different sectors of employment.
[100] If government employment is sought to be the benchmark for pay in the SACS industry, it must be demonstrated that payment at the level of government employment is the minimum gender neutral level of wages for the SACs industry. As noted in the May 2011 decision, no such presumption can be made. Further, the Full Bench has already stated that it would be wrong to conclude that the gap between pay in the SACS industry and pay in state and local government employment is attributed entirely to gender. The applicants have not established that this conclusion is erroneous or should be departed from.
[101] Further, there is material before this Full Bench that establishes that there is a public sector premium not related to gender in public sector earnings in Australia. It is also evident that there have been superior bargaining outcomes in the public sector which cannot be attributed to gender. The Australian Industrial Relations Commission repeatedly acknowledged this difference and in various arbitrated cases refrained from imposing public sector wages and conditions on private sector employers.
[102] It has not been established that public sector wage levels are a reliable benchmark for gender neutral wages in the not-for-profit sector. In my view the failure to establish a valid benchmark represents a significant flaw in the applicants’ case and is a barrier to granting the relief sought in this matter.