Pay equity decision looms as aged-care sector warns of potential '$500m' hit

A pay equity working group set up following a landmark Court of Appeal ruling is close to announcing its recommendations to the government on how the court's interpretation of the Equal Pay Act could be applied, with the aged-care sector warning its costs could jump by $500 million a year.

The government set up the group with governor general-elect Patsy Reddy as the facilitator last October, to recommend how employers and employees should implement pay equity. It was the government's response to a Court of Appeal ruling in the case of Kristine Bartlett, an aged-care worker, and the Service and Food Workers Union against private rest home chain Terranova Homes and Care.

The court rejected an appeal by Terranova and the NZ Aged Care Association in upholding an Employment Court ruling in 2013 that in female dominated work the Equal Pay Act 1972 "requires equal pay for work of equal value (pay equity), not simply the same pay for the same work", a change from how the law had been interpreted in the past.

The ramifications are potentially huge for the estimated 30,000 caregivers and 5,000 nurses working in New Zealand's 666 aged residential care homes - facilities owned by listed operators Ryman Healthcare, Metlifecare and Summerset Group, district health boards, charities, religious and welfare organisations, and private interests.

The NZACA says the ramifications of the case are "very significant" for its members based on union ambitions to raise the average hourly caregiver pay rate to $26 from $15.30 currently, just 5 cents above the minimum wage, an increase that would force retirement village operators "to find $500 million annually" and could result in some failing. And the Public Service Association says it is determined to ensure the court's interpretation of the Equal Pay Act is applied.

"Regardless of the outcome of the joint working group's discussions, businesses should be planning for equal pay," said Erin Polaczuk, PSA national secretary. "The courts have already decided that the Equal Pay Act 1972 applies to equal pay for work of equal value, so employers can expect claims, either under any decided principles or through the courts."

Ministry of Health officials and Health Minister Jonathan Coleman have declined to comment while the talks are underway. There were no specific initiatives related to the case in Budget 2016. However, pay equity and caregiver employment conditions were retained as a specific fiscal risk as the government enters negotiations over pay rates for care and support workers which will cover about 50,000 people.

Extra funding could flow out of the working group's recommendations "and any related litigation," the budget economic and fiscal update says.

The NZACA says the ramifications "potentially extend beyond aged care to other female-dominated sectors such as teachers, nurses, early childhood care workers and a whole range of other occupations" and noted the College of Midwives lodged a pay equity case last August.

The Bartlett case is due back in the Employment Court this year with the expectation that the court will set out general principles for implementing equal pay before turning to the specifics of the case. E Tu union spokesman Alistair Duncan says about 3,000 women have "joined the case", suggesting it may grow into a class action if a negotiated settlement can't be reached.

E Tu has a small holding of shares in Ryman, Metlifecare and Summerset so that it can attend annual meetings and lobby executives. Ryman, in particular, has been resistant to collective bargaining with the unions and is "ideologically opposed to transparency and collectivism," Duncan says.

Ryman's wage bill rose about 12 percent to $132 million in its 2016 year, which the company says reflects both wage inflation and staff being hired for new villages.

Managing director Simon Challies told BusinessDesk that Ryman's challenge was to improve productivity "so that we can pay people more". Technology has helped, including an electronic medication system and an improved roster system, he said.

Ryman, New Zealand's largest retirement village operator, posted a record profit in 2016, its 14th straight year of earnings growth. Its shares have soared 258% in the past five years.

The NZACA says its members "would dearly love to pay caregivers more, however, we are hamstrung by long-term underfunding by the government, which pays homes to care for the elderly."

"Our sector cannot fund an equal pay claim without commensurate increases in its charges to consumers, most of which are paid by the government in the form of age care subsidies," it says. "We will not be able to settle with the unions without a clear indication from the government that it will meet the extra cost."

(BusinessDesk)