Australia: Options available for women seeking equal pay

Swaab Connect – July Edition
Last Updated: 15 July 2011
Article by Swaab Author

Gender wage gap increasing for Australian women

Despite the fact that women in Australia won the right to equal pay in the early 1970s, so far we haven't succeeded in turning that right into a reality. In fact in recent years Australian women have gone backwards relative to other countries.

In 2006 Australia was #15 in the World Economic Forum's global gender gap index. By 2009 we had slipped to #20. Australian women now face bigger wage gaps than women in Syria, Indonesia and Thailand who are doing similar jobs. On average, Australian women today still earn 17% less than their male counterparts.

What are the options for women who want to pursue an equal pay claim?

So what happens when a woman decides to pursue an equal pay claim in this country?

Theoretically, there are three legal options available - equal remuneration applications, sex discrimination claims at both federal and state level and adverse action claims.

But the big questions are, when can these options actually be used and how likely are they to produce the desired result.

In practice, it's still very difficult for Australian women to achieve pay equality by pursuing legal avenues.

Equal remuneration orders

Women have been able to apply for an equal remuneration order for more than a decade, most recently under the Fair Work Act and before that, under the Workplace Relations Act. This option has been developed over time to ensure that Australia fulfils its obligations under various international conventions.

Previously this option was only available where women were receiving unequal pay for work of equal value. However, the Fair Work Act changed this to "equal or comparable value", which has made the principle broader. So women in a female dominated occupation can apply for equal remuneration orders if they believe that they are being paid less than men in a male dominated occupation, if the value of the work is comparable.

However, this option is generally limited to unequal pay claims of general application, rather than a particular employee, because Fair Work Australia (FWA) has to be satisfied that no adequate alternative remedy is available. So if a female employee discovers that she is being paid less than a male colleague in the same organisation, she will generally have to go for one of the other two options.

Case study – Equal Remuneration Case

In May 2011 a decision was handed down in an important successful test case involving employees in the social, community and disability industry. These are the 200,000 workers around the country who look after the homeless, the disabled, refugees, domestic violence victims, the elderly and other vulnerable people. It's an industry overwhelmingly dominated by women, it's been viewed historically as 'women's work', it's one of the lowest paid sectors in the country and not surprisingly, it has a very high rate of staff turnover. Several trade unions launched this case about a year and a half ago. There was considerable debate between the trade unions and the state governments about the correct way to proceed.

The Full Bench (of Fair Work Australia) ruled that FWA has a discretionary power to make an equal remuneration order when it is satisfied that there is pay inequality for work of equal or comparable value.

In exercising this discretion, FWA is guided by the objects of the Fair Work Act, which include "to provide a balanced framework for cooperative and productive workplace relations that promotes national economic prosperity and social inclusion for all Australians". FWA is also guided by equity, good conscience, the merits of the matter and the need to respect and value diversity by helping to prevent and eliminate discrimination.

This case is important because there have been almost no other cases of this type in the past. There was one brought by the Australian Metal Workers Union in 1998, seeking increases for female employees in a factory in Sydney on similar grounds, but this claim was rejected by the Australian Industrial Relations Commission because the union failed to prove that the work being done by the female-dominated classifications was of equal value to the work being done by the male-dominated classifications.

How FWA can establish that women's pay is unequal

There are two ways that Fair Work Australia can find that women's pay is unequal. The first is by identifying a valid male comparator group that is paid more than a female dominated group performing work of equal or comparable value. The second way, which was used in the Equal Remuneration Case, is to establish that the pay is subject to gender-based undervaluation.

However, this is not that simple. The Full Bench found that the indicia approach used by the Industrial Relations Commission of NSW is useful in determining whether pay is subject to gender-based undervaluation. This approach examines:

  • Whether the work is female dominated and has a female characterisation
  • Whether there is a strong union presence in the industry in which the work is performed (because a stronger union presence usually indicates a better protected workforce)
  • Whether there is a large component of casual workers
  • Whether there is a lack of or inadequate recognition of qualifications
  • Whether there are limited training or career paths

How FWA determines the order

The next step is for Fair Work Australia to quantify the extent to which this work has been undervalued and come up with a solution which redresses the balance.

It has to be said that despite the success of the case to date, the battle for equal pay is far from over for women in this sector. Fair Work Australia has invited further submissions on the case. Pay increases are being opposed by AI Group, the NSW government and the Victorian government, among others.

So even though everyone agrees that this is one of the lowest paid sectors in the country, that the work has historically been undervalued because it's performed by women, that this leads to hardship for these workers and their families and that the high staff turnover compromises service delivery, many of these services are funded by governments which dread the predicted blow-out in costs. Any solution is probably another year down the track and is unlikely to lead to generous pay increases for women in this sector.

Nevertheless, it is one of the first successful decisions for women seeking equal pay and so it has the potential to show the way forward for other women in similar circumstances.

Sex discrimination claims

The second legal option for women who want to pursue equal pay is a sex discrimination claim. This can be made under both federal and state employment legislation which prohibits employers from directly discriminating on the basis of gender.

These statutes also prohibit employers from engaging in indirect discrimination on the basis of gender. This occurs where an employer requires an employee to comply with a requirement which a substantially higher proportion of women are unable to comply with and which is not reasonable in the circumstances.

Sex discrimination case study: NSW v Amery

In 2006, thirteen NSW teachers argued that the Department of Education and Training had indirectly discriminated against them in formulating the rates of pay applicable to permanent and casual teachers. Permanent teachers were paid according to a 13-point scale, but casual teachers were paid on a five-point scale, with the highest rate of pay for a casual teacher being at the eighth level of a permanent teacher. As casual teachers could not progress beyond this pay point, they would receive less pay than permanent teachers, even if they had equivalent teaching experience.

The crux of the indirect discrimination claim was that female employees were precluded from accessing the higher pay rates of permanent positions because in order to become permanent, they had to be able to move around the state when required. The teachers argued that a high proportion of women could not comply with this requirement because they tended to have family responsibilities. They further argued that this requirement was not reasonable because the work performed by casual teachers was no less valuable than the work performed by permanent teachers.

High Court finding in NSW v Amery

In the High Court, the majority ruling was that there was no requirement in the first place and so the claim was rejected. The reasoning was that the legislation is restricted to applying to a particular employment category, so it was not possible to make a comparison between permanent teachers and casual teachers.

Chief Justice Gleeson found that having permanent status was a requirement for accessing the higher pay scales. However, he found that this requirement was reasonable because the ability of a teacher to transfer around the state is valuable and this justifies higher pay.

The effect of the High Court decision is to make it harder for women who want to pursue an equal pay claim, because employers can avoid sex discrimination claims through the way that they classify the employment. In this case, by classifying the teachers as casuals and giving them different rights and obligations to permanent teachers, the employer successfully dodged the sex discrimination claim.

Australian employers have been doing this for years. After the 1972 equal pay decision, one survey of employers found that 60% of them had simply reclassified the work done by women to a lower scale relative to men, so they could avoid the consequences of the ruling and continue to underpay the women.

Adverse action claims

The third avenue available for women is an adverse action claim under the Fair Work Act. This claim is available where an employer takes adverse action against the employee because of the employee's gender. So, if a woman discovers that she is being paid less than a male colleague who does similar work, she can argue that the employer has taken adverse action by discriminating against her because of her gender.

The obvious difficulty here is, how does a woman find out that she is being paid less than a male colleague? Putting that question aside, if she does find out, she has the benefit of the reverse onus of proof set out in the Fair Work Act. This means that if an applicant can establish adverse action, it is up to the employer to prove that it hasn't taken the adverse action for that reason or with that intent.

There haven't yet been any cases of women pursuing equal pay as an adverse action claim under the Fair Work Act, so it's not possible to predict how successful this option would be in practice.

How do we compare to the USA?

The American situation is similar to ours. There are at least two options for women who want to pursue an equal pay claim.

One is available under the Equal Pay Act 1963, which prohibits employers from paying women less than men in jobs that require equal skill, effort, responsibility and are performed under similar working conditions. This is similar to an equal remuneration application but it's not as broad as the Australian option, because it can only be used where the work is of equal value, rather than "equal or comparable" value. Another limitation is that employers can claim an exception by arguing that the different pay rates are justified by seniority, merit or productivity.

A second option is available under the Civil Rights Act 1964, which prohibits employers from discriminating against any individual in their pay on the basis of their gender. This option is similar to sex discrimination claims in Australia, but there are not as many barriers to making a claim in the USA as there are here.

Equal pay claim options for female professionals

Of the three legal options available in Australia for women seeking equal pay – equal remuneration orders, sex discrimination claims and adverse action claims, a female professional in Australia would probably be looking at the second or third of these, a sex discrimination claim or an adverse action claim, or both.

It wouldn't be impossible to pursue an equal remuneration order, but it would be highly unusual, because Fair Work Australia would have to be satisfied that no adequate alternative remedy is available.

How do Australian employers view equal pay claims?

Beyond the question of what legal options are available in theory, there is the equally important question of how employers in Australia view such actions in practice.

While I was writing this article, I asked our employment lawyers about this because they have large and small employer clients in many different industries in different states and regions, so they're very tuned in to employer attitudes.

I'd like to be able to say that the stigma attached to equal pay claims has waned and Australian employers now consider it to be perfectly acceptable and appropriate for women to pursue legal avenues in the quest for equal pay. Unfortunately I couldn't find an employment lawyer who agreed with this view.

Legal action against employers viewed with deep suspicion

One view I heard was that overwhelmingly, employers would have serious misgivings about employing any job applicant, male or female, who had ever taken any type of legal action against a former employer.

They wouldn't be first on the short list. If you did decide to employ them, you'd make sure that their employment contract was worded very carefully to safeguard against any imaginable type of future claim.

Discrimination claims not based on equal pay

Another view I heard was that it would be highly unusual for an individual woman to launch an equal pay claim – it's just not something that happens, because equal pay claims are typically pursued by unions on behalf of their members.

When individual women pursue claims of discrimination, it's to do with how they're treated, being denied opportunities which are available to men, being passed over for promotion, or being put on the slow track after returning to work from maternity leave. It's not around equal pay.

Gender diversity and the Australian Stock Exchange

So as Australian women continue to fall further behind in the gender wage gap, what does the future hold?

One bright spot on the horizon is the importance placed on gender diversity in the Australian Stock Exchange's corporate governance principles, which came into effect in January 2011. Companies listed on the stock exchange are now required to set gender diversity targets at board and senior executive level and to report every year on their progress towards achieving those targets.

The Australian Human Rights Commission has recommended that if there is a lack of substantial progress within five years, the government should consider introducing mandatory gender quotas for corporate boards, at least for publicly listed companies.

It's possible that female executive talent will come to be in significantly higher demand and shorter supply as a result of these reforms. Perhaps this will be the catalyst that helps us to narrow and finally close the gender pay gap in this country, at least at the executive level.

However, it may be drawing a long bow to say that this will then have a flow-on effect to the wages of women at all levels. There may be grounds for cautious optimism, but clearly, there are no quick fixes in an area where gender inequality has been entrenched for centuries.

Women's employment historically seen as a threat to men's jobs

To put our current situation in context, I'd like to take you back a few decades to the 1930s. Many women had entered the workforce during the First World War and had chosen not to return to a full-time homemaker role when the war was over.

When unemployment rose during the Depression, women who worked were blamed for unemployment amongst men. Australian footage from the 1930s proclaims:

"What a crazy society it is today, with nearly a hundred thousand men out of work and nearly two hundred thousand women at work in factories. Those women are doing two enormously harmful things. They are displacing men in whose sphere they have intruded and they are not producing in the field where they were created to produce. That is, they are not making homes and bearing the children our nation so desperately needs."

 See the website of Screen Australia, Equal pay paradox.

If we go back another 50 years from that time, we get an even sharper appreciation of the historical background to the current situation. When the first trade unions were formed in this country in the 1800s, they did not allow membership by women or by Chinese workers. Both groups were shunned as cheap sources of labour and no one was interested in protecting their rights. To join a union, you didn't just have to be a man – you had to be a white man.

So while it is galling that the gender pay gap still exists, realistically we have to acknowledge that the distance we've come in the last 130 years is much further than the distance we still have to travel to achieve true equality. Let's just hope it doesn't take us another 130 years to get there.  

For further information please contact:

Richard Ottley, Partner
Phone: + 61 2 9233 5544
Email: rbo@swaab.com.au

Warwick Ryan, Partner
Phone: + 61 2 9233 5544
Email: wpr@swaab.com.au

Swaab Attorneys was the highest ranking law firm and the 13th best place to work in Australia in the 2010 Business Review Weekly Best Places to Work Awards. The firm was a finalist in the 2010 BRW Client Choice Awards for client service and was named the winner in the 2009 Australasian Legal Business Employer of Choice Awards.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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