Employers are hanging their hopes on a change of government next year, which would ensure a short shelf-life for Labour’s Fair Pay Agreement legislation  |  Content Partnership

The new Fair Pay Agreement regime, which passed into law on Wednesday night, is unlikely to result in a single industry or occupation-wide deal before next year’s election, according to Paul Mackay, Business New Zealand’s manager of employment policy.

And if there is a change of government to a National-led administration, Labour’s flagship industrial relations reform will be “gone by breakfast-time”, predicts Mackay. National has vowed to repeal the law, arguing it will reduce the flexibility of the labour market.

Mackay was speaking yesterday at a Bell Gully webinar on the new regime, which will allow unions to initiate bargaining for collective employment agreements that set minimum pay and conditions across entire industries or occupations.

The objective of the legislation is to address the “race to the bottom”, in which competition between employers for market share has eroded worker wages in a largely deunionised workforce.

The regime is staunchly opposed by employer groups. The New Zealand Herald’s ‘Mood of the Boardroom’ survey shows it is regarded by chief executives as one of their biggest worries about the business environment.

Unions regard it as the most progressive and far-reaching industrial relations reform in three decades. The first worker groups planning to seek deals are already preparing to initiate fair pay bargaining, with bus drivers, cleaners, security guards, supermarket and hospitality workers likely to be among the first in the queue.

Unions will be able to initiate bargaining for a fair pay agreement covering a sector or occupational group if they can prove they have the support of either 1000 workers or 10 percent of those who would be covered by the proposed agreement. It’s irrelevant whether those workers are union members, and once an agreement is in place it will set minimum terms and conditions for all workers within its coverage.

Employers who fall within coverage will have to comply with fair pay agreement terms, and failure to do so would put them in breach and potentially liable for arrears or damages.

It will be mandatory for agreements to specify their scope of coverage, base wage rates, standard hours during which base wages apply, the rates of payment for any overtime worked, penalty rates, arrangements for training and development, leave entitlements, and the expiry date. Fair pay agreements can be from three to five years long.

It’s mandatory for the parties to discuss – but not necessarily to include in the final agreement – health and safety, redundancy and flexible working arrangements.

Bell Gully senior associate Rosemary Wooders. Photo: Supplied

The union initiating the agreement will determine how wide the coverage will be. Mackay says that in hospitality – a sector in which Unite Union has declared its intention to seek a fair pay agreement – the coverage could, for instance, include “all cooks and chefs … in hotels and cafes, which would be an industry-type approach”; or it could equally cover “all cooks and chefs, full-stop, which could cover aged care homes, factories, hospitals, you name it. It’s up to the union to decide how wide, and there is no ability for the employer to argue back in terms of how wide the coverage is.”

For employers who have no union members, no history of collective bargaining, and who may think fair pay agreements are not relevant to them, Mackay cautions that they need to beware because they could find themselves covered. If they are covered and don’t want to be, “that’s tough”, he says.

While Mackay acknowledges many employers will never be touched by a fair pay agreement, if they are covered by one there is no way to opt out. “There is no escape from a fair pay agreement once it is started if the coverage clause touches you … If you’re caught by the net, you’re in the catch.”

But Mackay and Bell Gully senior associate Rosemary Wooders, who also spoke at the webinar, predict complications, disputes and litigation will bog down the process and make it unlikely that any deals will be sealed in the next year.

One of the key issues is that, once a union has initiated bargaining for a fair pay agreement, they need an employer body to negotiate with. “Very few employer organisations or industry organisations in this country have a constitution that enables them to bargain collectively for their members,” says Mackay. “So almost any of the industry organisations that are likely to have to front up to fair pay agreement claims – say the Hospitality Association – are going to have to go to a special general meeting or an AGM to change their constitutions before they can even apply to be a bargaining party.”

Wooders lists a range of other aspects of the regime that will ensure the process is slow-moving. Following initiation by a union, approval must be gained from the Ministry for Business Innovation and Employment (MBIE) for the union and employer bargaining parties to represent either side; then the negotiations must take place; after which there will be “quite a long process” to get the agreement signed off and ratified by more than half of the covered workers and employers.

“And that doesn’t even touch on the fact that there are likely to be a number of disputes along the way, including coverage and various terms and conditions,” said Wooders. She predicts disputes will arise over the mandatory inclusion in fair pay agreements of provisions like “normal hours of work”, which which can vary widely between employers.

The requirement to include “training and development” provisions – a feature that was included during the Select Committee stage of the Fair Pay Agreement Bill – will also be fraught because there is “no description of what [that] could include”, says Wooders.

What happens if there is no organisation to bargain for the employer side of a fair pay agreement? The legislation includes a so-called “backstop” provision, which would see MBIE offer the role of bargaining agent to the “default” bargaining party that is the “most representative” organisation of employers.

By definition, that organisation is Business New Zealand, says Mackay. If the worker side ends up lacking a bargaining party, the default party would be the Council of Trade Unions.

Business New Zealand’s manager of employment policy Paul Mackay. Photo: Supplied

But MBIE’s offer doesn’t have to be accepted – and Business New Zealand announced last year that it has no intention of acting as a default bargaining party in a regime it is profoundly opposed to.

In the absence of a default bargaining party, the fair pay agreement would then go to the Employment Relations Authority to set the terms.

This is one of the most controversial elements of the new regime. Business New Zealand says it is a reversion to compulsory arbitration, and claims it is a breach of international labour law.

While strikes will be unlawful during bargaining for a fair pay agreement, Wooders and Mackay say industrial action can still occur in pursuit of “second-tier” bargaining. Here, they are borrowing from the industrial relations language of the 1970s and ’80s to refer to direct collective bargaining between unions and employers, which became increasingly common to top up the modest pay rates set in national awards (which set industry and occupation-wide minimum terms and conditions until they were abolished in 1991).

Under the fair pay regime, employers and unions will similarly be able to continue negotiating collective agreements that are specific to a company or site, provided the terms don’t fall below the minima in the fair pay deal.

In any case, Mackay makes no secret of his hope that the duration of the fair pay regime will be cut short by a change of government. In the meantime, he advises employers not to panic and to be thorough in their consideration of how to respond.

“The quickest way to get a fair pay agreement is to not participate, because it will get quickly to the [Employment Relations Authority],” he says. However, he says that might not be an agreement that an employer wants.

Take your time to change your constitution before you are eligible [to be a bargaining party], take your time to think about how you will communicate effectively with people. Consult thoroughly – so in other words don’t do a once over lightly … try your best to consult as many people as possible. That takes time.

“Time is our friend.”

Bell Gully is a foundation supporter of Newsroom.co.nz

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