Employment Law Update: Pay equity does not address (biggest) Pacific Pay Gap

Pay equity does not address (biggest) Pacific Pay Gap

Serious disparities in pay exist in New Zealand. Among these disparities, Pacific Islanders are the largest systemically undervalued group in New Zealand. Sianatu Lotoaso explores the Pacific Pay Gap and what we can do about it.

When it comes to undervaluation in pay, the government has tried to address this in the Equal Pay Act 1972 (EPA) by providing a framework to raise equal pay and pay equity claims. But the EPA is based on sex. For example, equal pay is about women and men receiving the same pay for doing the same job; and pay equity is about women and men receiving the same pay for doing jobs that are different but of equal value. Therefore, the existing legislation does not consider the biggest and most persistent pay equality and equity disparities in New Zealand, which is the pay gap between Pākehā and Pacific Island people (the Pacific Pay Gap).

Under the Human Rights Act 1990 (HRA) and Employment Relations Act 2000 (ERA), discrimination in employment on the basis of race and ethnicity is unlawful. Even if Pasifika chose to pursue an unlawful discrimination claim in the human

rights or employment jurisdictions, the difficulties they would face are significant if not insurmountable. This means no real legal recourse is available to Pasifika to remedy these disparities.

What is the Pacific Pay Gap?

Given the persistence of the Pacific Pay Gap, the Human Rights Commission (HRC) is currently conducting the Pacific Pay Gap Inquiry (Inquiry) to better understand why the Pacific Pay Gap exists and how it can be closed.

According to the Inquiry, in 2020, the gap in average hourly wages for Pacific men was 24 per cent, and Pacific women was 27 per cent when compared with Pākehā men. Pacific Pay Gap HRC faqs

In other words, for every dollar a Pākehā man makes, a Pacific man makes 76 cents, and a Pacific woman makes 73 cents. Pacific women are the most underpaid demographic in New Zealand. The gaps are substantial and have not changed significantly for more than 10 years.

A reference group was convened by the Equal Employment Opportunities Commissioner, Saunoamaali’i Dr Karanina Sumeo, to help the Inquiry. Following the Inquiry, the HRC will then consider whether to make recommendations, including on legislation. The Inquiry estimates that, if the gap “were to continue closing at its current rate, it would take 110 years before the Pacific Pay Gap was closed” . Pacific Pay Gap

What are the causes of the Pacific Pay Gap?

The factors causing these disparities in pay are complex. For example, the concentration of Pacific workers in certain occupations that are undervalued is relevant, but it does not explain everything.

In 2018, Treasury examined the Pacific–Pākehā pay gap and concluded that (like the Māori– Pākehā pay gap) educational level and occupation had the largest impact on the pay disparities experienced by Pacific people. The Treasury (2018) Statistical Analysis of Ethnic Wage Gaps

However, the majority of the Pacific Pay Gap cannot be explained by these two factors. For example, according to the Treasury analysis:

• differences in highest qualification account for 19–22 per cent of the pay gap for Pacific men and 20–22 per cent of the pay gap for Pacific women; and

• differences in occupation account for 31–33 per cent of the pay gap for Pacific men and

29–33 per cent of the pay gap for Pacific women.

As such, a large portion of the pay gap remains unexplained and could be caused by certain factors, including ethnic group differences in skills, differences in preferences for different jobs because of their non-wage characteristics, and discrimination. Treasury advised that further research was required.

The Law

The EPA is intended to remove and prevent discrimination on the basis of sex.

The Pacific Pay Gap, however, is not based on sex. Therefore, Pasifika cannot rely on the EPA to seek relief.

Discrimination in employment Pasifika could legally rely on unlawful discrimination provisions in the HRA and ERA.

Discrimination in employment is prohibited under the HRA and ERA. This includes discrimination on the basis of race and ethnicity.

• Discrimination in employment includes where an employer does not provide an employee with the same terms of employment, work conditions, superannuation or fringe benefits, opportunities for training, promotion, and transfer as other employees:

• with more or less the same qualifications, experience, or skills, or

• who are employed in the same or substantially similar circumstances.

By definition, this would include situations where employers provide Pasifika employees with lower rates of pay than are provided to employees of the same or substantially similar capabilities employed in the same or substantially similar circumstances on work of that description (ie, Pākehā who perform the same or substantially similar work).

Difficult to progress an unlawful discrimination claim

An employee who claims to have been unlawfully discriminated against can choose to bring a claim under the HRA or ERA, but not both. Generally, employees will bring their claim under the ERA because it means other non-discrimination claims can be included. It is also typically a quicker process.

Despite the legal pathway available to Pacific people to address their pay disparities under the human rights or employment jurisdictions, it comes with significant difficulty and is not often pursued, as evidenced by the lack of case law. First, the financial

burden on an already lowly paid ethnic group means Pacific people will be unlikely to pursue legal action. When deciding how to pay for rent or food is a primary concern, pursuing legal action is unlikely to be a realistic option.

Second, it is extremely difficult for an individual to establish unlawful discrimination in relation to pay when the undervaluation of work is systemic and historical. Currently, individual claims are the only way to respond to systemic undervaluation. Unlike the EPA, the HRA and ERA do not provide a collective approach to undervaluation. For Pasifika, therefore, unlawful discrimination claims must be on an individual basis, rather than being able to approach a systemic issue from a broader perspective.

While Pasifika are individually affected by being underpaid, this is because they belong to an ethnic group who are collectively underpaid. So, a Pasifika individual making an unlawful discrimination claim is fronting a systemic and historical undervaluation of Pasifika collectively. The systemic undervaluation of Pacific Islanders’ work is an ongoing consequence of New Zealand importing Pacific Islanders since 1860 as cheap labour. How does a Pacific Islander individually prove that the current market rate for their work is fixed arbitrarily at a significantly lower rate than other ethnic groups? It would be with significant difficulty under the current legal framework.

The fact that Parliament legislated a separate pay equity framework to help women in establishing pay equity claims based on industry and occupation is indicative of the insurmountable difficulty facing Pasifika from pursuing these sorts of claims, under the current legal frameworks. Yet, they are excluded in the current pay frameworks.

No easy fix

The Inquiry is reviewing all the factors that contribute to the pay gaps experienced by Pasifika in New Zealand, to provide the HRC with more clarity around this problem. The Inquiry hopes its recommendations will contribute to the Pacific Pay Gap, and the ethnic pay gap overall, being closed in a much shorter timeframe than 100 years.

Of late, there appears to be a willingness to address unfairness and inequities around pay. Recently, it was reported that, by forcing employers to report on gender pay gaps, unexplained differences in pay could be slashed by up to 40 per cent. 11 This solution to pay concerns is not new, collective employment agreements already publish salary scales for roles so pay is clear and consistent. However, pay transparency on its own may not be sufficient to bridge the significant Pacific Pay Gap.

The proposed fair pay agreements framework, if implemented, may further help with pay transparency. The pay equity framework could be used as an initial blueprint to allow Pasifika, and others, to bring a collective-based ethnic and racial claim for systemic undervaluation.

No easy fix exists to the Pacific Pay Gap, and the current gap in legal recourse available to Pasifika is not sustainable. Based on current statistics, it is estimated that by 2043 most of New Zealand’s population will be Māori, Pacific and Asian. Specifically, Pacific people are projected to make up nearly 11 per cent of New Zealand’s population. As such, the growing Pacific population in New Zealand, will affect New Zealand’s workforce and, in turn, could affect New Zealand’s employment laws.

Sianatu Lotoaso is an Associate at Dundas Street Employment Lawyers. Sianatu provides advice on all aspects of employment law and the employment relationship. Sianatu regularly provides advice to a range of clients in the public and private sectors.