TerraNova Case Appealed To Supreme Court

TerraNova Case Appealed To Supreme Court

Today the New Zealand Aged Care Association will appeal to the Supreme Court on behalf of TerraNova Homes and Care Limited in their case with the Service and Food Workers’ Union and Kristine Bartlett.

“This case has vast implications for all New Zealanders and we felt compelled to have the highest court in the land settle the questions around the Equal Pay Act 1972 once and for all,” said Martin Taylor, CEO of the NZACA.

“In handing down its recent judgement, the Court of Appeal said the decision was finely balanced with strong arguments favouring both sides. We believe the issue must be seriously looked at and tested again.

“The Court also noted that the Equal Pay Act ‘is very poorly worded’, and ‘the syntax is cumbersome and the drafting elliptical’. Effectively this issue has been caused by a past Parliament and really needs to be resolved by Parliament now.

“Another reason why we need to appeal is that there are hundreds of rest homes operated by individuals and community trusts from Kaitaia to Bluff who have told us they would close if wages went up significantly and funding stayed the same.

“When you understand this reality we have no option but to appeal, despite everyone agreeing caregivers are worth more.

“It is also worth noting this case is not about TerraNova and never has been. They are in the same position as everyone else and have done nothing wrong”, Mr Taylor said.

NZACA has signed a litigation funding agreement with TerraNova. This means NZACA has been directing the litigation from the defendant’s perspective since late 2013.

Frequent Questions and Answers

1. The aged residential care sector is controlled by large for profit corporations.
Wrong. The five largest aged care operators are BUPA (60 facilities), Oceania (45 facilities) Ryman (25 facilities) and Radius (19 facilities). Collectively, they make up 23% of the aged care sector comprised of 650 facilities. Also, BUPA is a not for profit organisation as they do not have shareholders who receive a dividend from surpluses. If that is taken into account then the large for profit aged care providers only make up 13.6% of the sector.
The realty is there are more facilities run by religious and welfare organisations and standalone SME operators than large corporates.

2. All aged care operators are making good profits.
Wrong. The 2010 Grant Thornton Aged Residential Care Review (which was paid for by the Government) found that one quarter of all operators were making a loss, the next two quarters were making less than required to cover their costs of capital, and only the top quarter were making an appropriate return on their investment (see figure 22 in the report). This statement also raises the question on what is a fair profit or a fair return on an aged care investment. The Government agreed in 2010 that this was 12.1%, as set out in the Grant Thornton report. If people do not believe aged care operators should make a fair return on their investment they do not understand how market based economies operate.
http://www.grantthornton.co.nz/aged-residential-care-service-review.html

3. Because aged care operators are making profits they can cover the cost of higher wages.
Wrong. The level of wage increase being discussed is large i.e., from an average of $15.31 to around $17.50. That is around a 14% increase. No business can sustain an increase in costs of this level without an increase in income. For the aged care sector that means we will need an increase in the government subsidy.

4. The government subsidy for care is enough to make a profit.
Wrong. Over the last decade 200 aged care facilities have closed. These have closed primarily for financial reasons. Their other commonalities were they relied on the government subsidy for all of their revenue and were smaller than average.
Operators making a profit now do so by providing retirement village living options and premium aged care facilities and care, which consumers pay extra for. These options are very popular which is fortunate as this is the sole source of return on investment for many providers. Currently, consumers paying for retirement options and premium services are cross-subsidising residents receiving a government subsidy.

5. All aged care facilities are big.
Wrong. Of the 650 aged care facilities in NZ, the average size is only 50 beds. 26% of all facilities are less than 40 beds and only 10% of facilities are larger than 120 beds.

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