Business New Zealand’s campaign to shame the Government on the world stage over its flagship workplace relations policy has achieved a key milestone overnight, with New Zealand listed among 22 countries accused of egregious abuses of international labour law.

The case to the International Labour Organisation is a central plank of Business New Zealand’s lobbying against the planned introduction of Fair Pay Agreements, which will allow 1000 workers, or 10 percent of a workforce, to initiate bargaining for a collective agreement to cover an entire sector or occupation. Supermarket workers, cleaners, bus drivers and other low-paid groups are expected to be first off the rank with fair pay claims when the legislation – now before the education and workforce select committee – comes into law.

The policy is a longstanding Labour manifesto promise, and was finessed in 2018 by a working group that was chaired by former National Prime Minister Jim Bolger, who presided over the extreme deregulation of the labour market in 1991.

Business New Zealand chief executive Kirk Hope was also on the working group, however he dissented from the majority view that sector- and occupation-wide fair pay deals should apply compulsorily to all employers within their scope.

Business New Zealand employment relations manager Paul Mackay, who cut his teeth in the days of national awards and is a veteran of the ILO, has developed the international case against fair pay agreements. He and his group have captured the support of the international employer lobby in pushing to have the case heard by the Committee on the Application of Standards at the ILO’s annual conference, which is underway in Geneva.

New Zealand’s appearance on the short list puts it alongside countries such as Azerbaijan, China and Guatemala – accused variously of child labour, slavery and trafficking of children – and Myanmar, accused of systematic violence against workers and pro-democracy demonstrators and the targeting of trade union leaders.

Business New Zealand alleges Fair Pay Agreements offend against ILO Convention 98, which protects the right to organise and collectively bargain. It claims the proposed regime – intended to reverse the collapse of collective bargaining following the 1991 Employment Contracts Act – is “inconsistent with the principle of free and voluntary bargaining” because employers won’t be able to opt out, and unresolved disputes can go to compulsory arbitration. It says the Government knows the new regime will breach Convention 98, but is going ahead with the reform anyway.

Ironically, Business New Zealand uses the very weakness of the union movement in this country as one of its arguments against fair pay agreements. The fact that only about one in 10 private sector workers are union members means “almost any industry or occupation can be forced into bargaining for an FPA by a union that represents a tiny fraction of the workforce to be covered,” it says in documents filed with the ILO last year.

It says the history of Convention 98 shows its purpose is to promote voluntary bargaining between employer and worker representatives.

New Zealand ratified Convention 98 in 2003. Before this, New Zealand was not able to comply because of the historical role of compulsory arbitration and compulsory union membership at one extreme, and then failure of the Employment Contracts Act to recognise worker unions at the other. Only when the moderate Employment Relations Act was introduced in 2000 was ratification viable. (Not that the Employment Relations Act was regarded by employer interests as moderate at the time, however: it triggered a “winter of discontent” during the first year of the Helen Clark-led government, with an intense media campaign including inaccurate statements that it would lead to strikes for national awards and de facto compulsory unionism.)

Council of Trade Unions president Richard Wagstaff, who – with Mackay – is in Geneva for the ILO conference, told Newsroom last night there was little surprise that New Zealand had been put on the shortlist. “It was expected because of the employers’ insistence in negotiations at the ILO to have it discussed. Being on the shortlist does not in any way indicate the ILO does not support the creation of FPAs in New Zealand…The shortlist reflects a process of negotiation between employers and unions at the ILO and it has been agreed that a discussion concerning FPAs, how they work and their benefits would be desirable.” He looked forward to “sharing the benefits of the proposed FPA system with other countries at the ILO”.

Workplace relations minister Michael Wood has been dismissive of Business New Zealand’s bid to take its campaign against fair pay agreements global, and accused the group of mis-information when it falsely claimed two weeks ago that New Zealand had been placed on a “naughty list” of “worst case” breaches. Wood says sector-based bargaining is a common and accepted process around the world, and that arbitration is is well-established in ILO jurisprudence.

“Our 30-year experiment with a low labour-cost model has not worked,” he says. “Many workers have suffered, but, equally, our rates of labour productivity have been amongst the worst in the world under that regime.” He claims fair pay deals will shift businesses away from wage-based competition – the so-called ‘race to the bottom’ – and focus inter-firm rivalry on productivity-enhancing innovation, skills, and research and development.

New Zealand has one of the lowest rates of collective bargaining in the OECD, with only about 17 percent of the workforce covered by union-negotiated collective pay deals. The vast majority of workers are on individual contracts, an overhang of the Employment Contracts Act that has not reversed in the 22 years since its repeal.

Having strongly promoted deregulated labour markets in the past, the OECD and International Monetary Fund have shifted in recent years to supporting collective bargaining, which is associated with lower levels of inequality. Workers covered by collective deals also tend to be paid more than those who are not.

In a recent report , the ILO has pushed voluntary collective bargaining as a way of cushioning the economic and employment impacts of the Covid-19 pandemic. “Collective bargaining can help to forge resilience in the short term, facilitating the tradeoffs required to ensure business continuity and save jobs and earnings, while transforming work practices in the long run. These features have been particularly crucial in the context of the Covid-19 crisis.”

The arguments over New Zealand’s alleged breach of Convention 98 will be heard at the ILO on Wednesday next week. The last time this country was in the international spotlight because of its labour practices was in the early 1990s when the Council of Trade Unions raised a complaint to the ILO over the Employment Contracts Act.

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