Fair Work Commission hands down first decision on equal pay

This Employment Update examines the Fair Work Commission’s (“Commission”) first decision involving an application for an equal remuneration order since the provisions saw significant reform as part of the Federal Government’s Secure Jobs, Better Pay legislation in 2022.

The decision provides useful insight on how the Commission will interpret the new provisions and decide these types of applications.

An equal remuneration order is an order that ensures equal remuneration between genders when work of equal or comparable value is performed.  Under the expanded provisions, the Commission can order that an employee whose work is undervalued be paid more but cannot order that an employee’s remuneration be reduced.

The Federal Government’s significant reforms to the industrial relations framework in 2022 saw an expansion of the equal remuneration order jurisdiction.  The factors that the Fair Work Commission can take into account when an employee, union, or the Sex Discrimination Commissioner makes an application for an equal remuneration order have been expanded and now include:

(a) comparisons within and between occupations and industries to establish whether the work has been undervalued on the basis of gender,

(b) whether historically the work has been undervalued on the basis of gender, and

(c) any fair work instrument or State industrial instrument.

When the assessment undertaken by the Fair Work Commission makes the comparison referred to at paragraph (a), the Commission is not limited to assessing similar work, and also no longer needs to make a comparison with a historically male-dominated occupation or industry.

Importantly, the recent changes saw a new provision introduced which provides that when the Commission makes an assessment referred to at paragraphs (a) or (b) above, it is not necessary to find that discrimination on the basis of gender was the reason for the undervalue in order to establish that work of equal or comparable value has been undervalued between the genders.  This means that an employer does not have to underpay a man or woman in comparison to someone of the opposite gender because of their gender, only that work of equal or comparable value is being done and there is a difference in the value of compensation between the genders, for whatever reason.

When the Commission finds that work of equal or comparable value is being done, and there is not equal remuneration between the genders, the Commission must make an equal remuneration order, so long as the application to the Commission is validly made.

Sabbatini v Peter Rowland Group Pty Ltd [2023] FWCFB 127

The first application to be considered by the Commission under the reformed laws was brought by a female chef who was employed from April 2021.  The chef resigned in May 2023 after discovering that three male chef colleagues were receiving a salary $15,000 higher than her own for doing the same work.  Of the five chefs who were employed at the time the employee resigned, three males were paid annual salaries of $80,000, and one male and the female who brought the application were each paid annual salaries of $65,000.

The Fair Work Commission’s expert panel (which is convened for these applications) accepted that the employee was classified at the same award level as her male colleagues. Notably, the Commission accepted “unequivocal” evidence that the employee performed the same duties as her male colleagues, and had the same level of responsibility, which led the Commission to accept that she “performed her work to the same, if not higher, standard than the other chefs”.

The employer did not challenge that the three male chefs were paid more, or that their duties or responsibilities differed from the female chef, but rather that the pay “recognised their length of service and contribution for their time working” for the employer.  The employer asserted that two of the three male chefs in question had 20-year periods of service with the employer group and argued that the higher salaries were paid as a “retention strategy”.

The Commission rejected that argument as “misconceived”, given that the Commission is not required to find that discrimination on the basis of gender occurred.  The Commission noted that it was only necessary for the Commission to be satisfied that work of equal or comparable value was being done, and there is not equal remuneration between the genders.

Having accepted the employee’s evidence that she was doing work of equal or comparable value and that her remuneration was undervalued as against those male co-workers, the Commission found it would have been obliged to make the equal remuneration order if not for the invalidity of the employee’s application (discussed below). This is also notwithstanding that another co-worker, a male, was also paid at the same salary as the female chef, being $15,000 below the other male co-workers.

Prospective or retrospective?

Critically to the employee’s application, the FWC determined that the equal remuneration order provisions only provided for orders to be made in respect of current employees, and for future remuneration purposes.   The Commission found that there was no ability for orders to be made for back-pay.  As the employee had resigned prior to bringing her application, and she sought back-pay for the historically undervalued work as against her male co-workers, the Commission found that her application was not validly made and dismissed the application.

Key take-aways for employers

Despite the application being dismissed, this decision provides useful guidance for how these reformed provisions will be interpreted in respect of current employees bringing such an application.

The Commission’s findings in this case clarified that the reformed equal remuneration order provisions cannot provide restitution for past pay disparity.  Rather, the FWC is only permitted to make orders to ensure that there will be equal renumeration between the genders where work is performed of equal or comparable value.

The new provisions will have implications for employers who have unequal remuneration between men and women workers performing work of equal or comparable value.  This will be a risk for employers, even where the employer has lawful reasons as to why the relevant workers are paid differently, or where employers have different genders on one pay rate, but then employees of one gender only on a higher pay rate. This includes commercial reasons such as incentivising an employee to transfer from a competitor or say as a retention strategy.

For any assessment of your potential risk from these types of applications do not hesitate to contact one of our expert lawyers at Aitken Legal.

Disclaimer: The information contained this article is general and intended as a guide only. Professional advice should be sought before applying any of the information to particular circumstances. While every reasonable care has been taken in the preparation of this update, Aitken Legal does not accept liability for any errors it may contain. Liability limited by a scheme approved under professional standards legislation.