Business New Zealand’s attempt to derail the Government’s controversial Fair Pay Agreements legislation at the International Labour Organisation has flopped.

Instead of issuing the grave condemnation sought by the business lobby, the ILO has waved the Government’s flagship industrial relations reform through, and doesn’t want to hear any more about it for two years.

Business New Zealand’s complaint against the regime was discussed by the Committee on the Application of Standards at the ILO’s annual conference in Geneva on June 8 and the committee reached its conclusion on Friday night. In stark contrast to the strong diplomatic language used in its reports on other countries facing complaints – including allegations of child trafficking, harassment and murder of unionists, and repression of minorities – the committee issued a bland four-sentence conclusion on New Zealand.

It urged the Government to “continue to examine” the draft Fair Pay Agreement (FPA) legislation, in consultation with unions and employer groups, “to consider the impact of the proposed legislation and ensure compliance with [ILO Convention 98]”.

Business New Zealand alleged the FPA regime was in breach of convention 98, which protects the right to organise and collectively bargain. It claimed the proposed reform – 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, unresolved disputes can go to compulsory arbitration, and in certain circumstances an FPA can go straight to the Employment Relations Authority to fix the minimum terms.

Business New Zealand’s manager of employment relations policy, Paul Mackay, alleged at the committee that the Government was “thumbing its nose at the ILO supervisory system”, and sought strong condemnation. “For the sake of workers and employers throughout New Zealand, and for the sake of the continued integrity of the ILO supervisory system, we urge this house to condemn the actions of the New Zealand Government in the strongest possible terms.”

However the committee kept its condemnation for the likes of China’s repression of Uyghurs (which it “deplored”), the disregard for human fights and the rule of law in Myanmar (also “deplored”), and the violence, intimidation and imprisonment of union leaders and employer representatives in Nicaragua (“deplored”). The committee demanded a report back from such countries in September this year.

In response to the committee’s benign conclusion about New Zealand’s planned reforms, Workplace Relations and Safety Minister Michael Wood accused Business New Zealand of bringing a “vexatious” complaint to the ILO, and of engaging in “active misinformation” against FPAs.

“After the ILO conclusion it’s time for Business NZ to come back to the table and work with us to introduce a system that allows industries to set minimum pay and working conditions to stop a race to the bottom,” he said in a statement.

Business New Zealand quit any involvement in the fair pay process late last year, announcing it would not act as a bargaining agent for employer groups in FPA negotiations and would refuse Government funding tagged to help unions and employer bodies fulfil their expanded roles under the regime.

It is running an advertising and social media campaign against the proposed legislation – currently before the workplace and education select committee – alleging FPAs will “at the stroke of a pen…take away control from Kiwi workers and give it to faceless officials in Wellington who will decide how you work, when you work and how much you will get paid.” It claims that once a FPA is in place it will be “virtually impossible” for workers and employers to negotiate flexible conditions.

In fact, where FPAs are established, they will set minimum terms and conditions for the industry or occupation within its scope, and workers and employers will be free to continue to negotiate collective or individual agreements directly, provided they don’t fall below the FPA minimums.

The proposed FPA system was laid out by a tripartite working group in 2018, chaired by former National prime minister Jim Bolger. Michael Hobby, international labour policy advisor at the Ministry of Business, Innovation and Employment, told the ILO committee last week the reform was designed to address the “increasing evidence of a race to the bottom” in some sectors, following the dramatic fall in unionisation after the labour market deregulation of the 1990s and a lack of sector-wide bargaining, “which enable[s] businesses to undercut their competitors through low wages, or by shifting risks onto employees without corresponding compensation.”

Without multi-employer or nationwide bargaining, “wages come under pressure, and employers have fewer incentives to innovate or raise productivity. This is because they can increase profits simply by reducing wages, rather than adopting other strategies”.

Hobby told the committee there had been a consequent rise in “low-paying jobs and poor working conditions”, as well as increased casualisation and growth of labour hire practices. This has “disproportionately” affected groups such as Māori and Pasifika workers, young people and those with disabilities, “who are over-represented in jobs where low pay, poor health and safety practices, low job security and limited upskilling are significant issues.”

New Zealand has one of the lowest rates of collective bargaining in the OECD, with only about 10 percent of private sector workers covered by a union-negotiated deal.

The new Australian government swung in behind the FPA regime at the ILO, its representative telling the committee that sector-wide minimum standards, in combination with collective bargaining, provided a “safety net” while also driving wage growth and productivity. Australia’s own industrial relations system operates at three levels, with statutory minimum rights and a minimum wage, occupational awards that set industry-wide conditions for over 100 sectors and occupations, and collective bargaining at enterprise level.

The International Transport Workers Federation (ITF) gave evidence to the committee of a “catastrophic” impact on bus drivers’ wages following the abolition of New Zealand’s award system in 1991 and the move to competitive tendering of bus services. “The lowest wage payable under the 1990 bus industry award was 66 percent higher than the minimum wage,” the ITF told the committee. “Today’s lowest rates are scarcely 10-15 percent above the minimum wage.” If wages had kept up with productivity growth during the period, the average transport worker would have been $36,000 better off in 2021, according to the ITF statement.

A Samoan worker representative also backed FPAs as a way to protect vulnerable Pasifika RSE workers who “can’t possibly engage in effective and fair individual bargaining or collective bargaining under the Employment Relations Act. Without industry minimums, “our people do not receive fair wages and enjoy decent terms of employment under the RSE scheme”.

Business New Zealand has acknowledged there is “market failure” under the current industrial relations regime for some groups of workers, but says this should be fixed through the development of voluntary codes setting out “a reasonable approach to terms and conditions” in sectors with “clearly demonstrated undesirable labour market outcomes”.

Under the proposed regime, an FPA can be initiated by a union representing 1000 workers, or 10 percent, of a sector or occupation group. The resulting agreement will apply to all workers and employers within its scope. Strikes in support of FPAs will be banned.

It’s expected bus drivers, supermarket workers, cleaners and security guards will be among the first in the queue to initiate FPAs once the legislation is passed.

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