Paying men more than women? The risks of an equal remuneration claim

The Full Bench of the Fair Work Commission (FWC) recently found that a female employee deserved equal pay, but did not make an equal remuneration order (ERO) in the recent decision of Elena Sabbatini v Peter Rowland Group Pty Ltd [2023] FWCFB 127, which provides important insights on the Fair Work Act 2009 (Cth) (FW Act)’s equal remuneration regime.

Whilst the Full Bench found that “gender inequality in remuneration existed”, it held that that EROs can only be made for current employees to lift their remuneration and not to remedy past instances of unequal remuneration or order backpay.

What is an equal remuneration order?

Under the FW Act, the FWC has the power to make orders it considers appropriate to ensure equal remuneration for men and women workers for work of equal or comparable value. These orders are called ‘equal remuneration orders’ (EROs). As part of the recent amendments to the FW Act under the Secure Jobs, Better Pay Act 2022 (Cth), passed in December 2022, changes were made to the FW Act to specifically address the gender pay gap. These changes include enabling the FWC to make EROs on its own initiative, the inclusion of matters for the FWC’s consideration in assessing whether there is equal remuneration for ‘work of equal or comparable value’, as well as the prohibition of pay secrecy clauses.

The case

In this case, Ms Sabbatini was employed as a chef with a food catering business. Ms Sabbatini and her male colleagues were all employed as Chefs de Partie and all classified as Level 6 under the Hospitality Industry (General) Award 2020 (Hospitality Award). Ms Sabbatini commenced employment in April 2021, initially as a casual employee but was subsequently employed on a permanent full-time basis.

Ms Sabbatini contended that she performed work of equal value to that of three of her male colleagues, but was paid a significantly lower salary than them. As a full-time employee Ms Sabbatini was paid $65,000 annually (being the minimum annualised wage under the Hospitality Award), while three of her male colleagues performing the same role were paid an above-award annual salary of $80,000. Ms Sabbatini became aware of the difference in their salaries and subsequently resigned from her employment.

The employer contended that the difference in pay was not gender-related, and that the three male chefs were paid higher salaries to recognise their length of service with the employer (with two of them having at least 20 years’ service) and as a ‘retention strategy’. The FWC however, said that the employer did not otherwise identify any ‘work value’ related reason for the higher salaries being paid to the male chefs, nor did the employer make any suggestion that their duties or performance involved a higher level of skill, training or responsibility than Ms Sabbatini.

The FWC also made the following observations:

Ms Sabbatini performed work of equal value to the three male chefs – they performed the same duties, had the same level of responsibilities and worked in the same environment. Ms Sabbatini performed work to the same if not to a higher standard than the other chefs;
there was no ‘equal remuneration for work of equal or comparable value’ and gender inequality in their remuneration existed as she was paid significantly lower than the three male chefs.

The FWC also confirmed that it was not necessary for the rates of pay to have been established for a gender discriminatory reason in order to obtain an ERO.

However, Ms Sabbatini’s application was dismissed on the basis that she was no longer employed by the employer. The FWC held, based on the interpretation of the relevant provisions of the FW Act, that an employee seeking an ERO would have to be a current employee to be able to apply for an ERO and for an ERO to apply to them. The FWC also said that EROs are intended to apply prospectively going forward, and are not intended to apply retrospectively to remedy past instances of unequal remuneration.

Key takeaways for employers

While this application was ultimately unsuccessful, the decision provides useful insight on the operation of the newly amended ERO provisions of the FW Act and serves as a reminder to employers to be alert to pay discrepancies between men and women employees who perform work of equal or comparable value. Unless a legitimate ‘work value’ related reason can be identified for such a discrepancy, employers may be at risk of an ERO. Length of service and a lack of gender-discriminatory intent will not be enough to defend an unequal pay claim.

Employers be alive to the following:

employers should assess their pay practices and consider if there are any risks of exposure to an ERO (i.e. is there is a pay disparity for the same or comparable work performed by male and female employees);
if pay discrepancies are identified, employers should critically assess whether there is any evidence of pay inequality based on gender and potential reasons for this;
even if there is no intention for the disparity of the pay rates to be gender discriminatory, an employer can still be subject to an ERO;
rewarding long tenure with higher rates of pay (or using this as a retention strategy) will not be sufficient justification for the pay inequality. Employers must have a legitimate ‘work value’ related justification to defend a claim for an ERO;
recent changes to pay secrecy laws and the above decision may potentially result in more ERO applications being brought.