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Chapman Tripp Partner Marie Wisker, Special Counsel Geoff Carter, and Senior Associate Vonda Engels discuss the recommendations from the Bolger-led tripartite Working Group which is developing a workable Fair Pay Agreement system. Vonda will give a presentation on Fair Pay Agreements at the Employment Law Reforms: The Changes Keep Coming Conference in March.
The Bolger-led tripartite Working Group charged with developing a workable Fair Pay Agreement (FPA) system has produced a set of recommendations covering most of the design features.
The Minister has refused to rule out any of the recommendations, saying that all of them will be considered carefully. But it is clear from the report and the reaction to it that a key area for debate will be whether an FPA system should be compulsory.
The employer representatives in the Group were strongly of the view that participation should be voluntary and that employers should be able to opt out of the bargaining process, and out of any resulting FPA at any time.
PROPOSED PROCEDURE
Initiating bargaining
The Group recommends that only workers and their union representatives should be able to initiate an FPA. It proposes that two triggers should be available to initiate a bargaining process:
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- a minimum threshold of 1,000 workers or 10% of the workforce (including non-unionised members), whichever is the lesser, and
- a “public interest trigger” where there are “harmful labour market conditions” in the nominated sector or occupation. These would be set in legislation and assessed by an independent third party, and the Government would need to consider in the policy design how to mitigate potential negative effects on competition.
Coverage
The occupation or sector to be covered would be defined and negotiated by the parties.
All workers – not just employees – would be covered to avoid “perverse” incentives for work to be defined in a way that would set it outside employment regulation. The Group notes that this would be “a significant change to the current employment relations model” and might be hard to reconcile with contractors operating under a business structure.
We agree that it would create practical implementation problems and are not surprised that this was a majority rather than a consensus recommendation.
In accepting the fact that lifting standards may force some employers out of business or discourage them from hiring workers with “perceived risk factors”, the Group recommends that some flexibility should be allowed for temporary exemptions within an FPA on application to an independent third party.
Scope
The legislation should set the minimum content for an FPA, which would include redundancy and flexible working arrangements. Parties would also be free to discuss other matters, such as productivity-related enhancements, even if they do not agree provisions to insert into the FPA.Any enterprise-level collective agreement would need to equal or exceed the terms of the relevant FPA.
Bargaining parties
The Group recommends that parties nominate a representative to bargain on their behalf, with a role for national representative bodies (Business NZ or the CTU) to coordinate bargaining representatives.
Bargaining process
There would be clear timelines to prevent drawn out negotiations creating excessive uncertainty or cost. Notification of all affected employers and workers will be critical, with minimum requirements set in law.
Dispute resolution
The Government had already ruled out recourse to industrial action. Disputes over coverage could be referred to the Employment Relations Authority (ERA), and disputes during bargaining could be addressed through mediation, with the ERA having the final word if the dispute cannot be resolved.
Chapman Tripp comment
It is worth noting that the recommendations are prefaced with the comment that, if the Government wanted to proceed with an FPA framework, “then this was the best way to design it” – a caveat which probably reflects a lack of employer enthusiasm for the idea.
The fact that the Prime Minister has already said that there will only be “one or two” FPAs concluded this term. This shows that the Government is acutely aware of the political risks associated with this policy.
The Government is taking a cautious approach, saying it will not rush any decisions but will “take the time to get it right”. This may reflect the experience of the Employment Relations Amendment Bill last year, when New Zealand First forced a late back down on the 90-day trial periods rule.
We agree with the two key issues that the media commentary has highlighted to date: whether an FPA system should be compulsory and whether the recommended trigger for bargaining has been set too low.
We also question whether the report truly answers Treasury’s challenge on whether a lack of sector-wide bargaining is in fact the cause of New Zealand’s poor productivity and low wages.
The Working Group accepts that “the relationship between these factors is not clear cut, and is highly dependent on wider labour market systems, and the social and economic models of individual countries“.
However the Minister’s comments following the report seem to accept that there is a causal relationship. We would like to see that assumption and the broader economic context (including the planned increase of the minimum wage to $20 an hour) to be a part of the debate.
On the one hand, it is an important deliverable to the unions, a key part of Labour’s support base. On the other, the Government will not want to send business confidence into another tailspin. Then, there is the difficulty of negotiating a mutually acceptable compromise with more conservative and small business-friendly NZ First.
Chapman Tripp will continue to monitor developments in this space and will keep you informed through further article publications. Please contact the authors if you have any queries with this article or area of law.
Partner Marie Wisker works with a number of the firm’s key clients, many of whom are large employers. Her broad range of general commercial experience means that she is able to provide practical advice relevant to the clients’ commercial objectives. Marie assists clients on the full range of employment and health and safety matters. She has represented clients in numerous mediations and hearings, has experience in acting for employers on health and safety investigations and prosecutions and works alongside clients to help them understand the new health and safety regime. Marie helps clients manage employment and health and safety risks through compliance advice and training, and she has spoken at a number of conferences on both employment and health and safety. Marie is recognised as an Up and Coming lawyer in Chambers Asia Pacific 2019. Contact Marie at marie.wisker@chapmantripp.com or connect via LinkedIn.
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Special Counsel Geoff Carter has more than 19 years’ legal experience and is a senior lawyer in our Christchurch litigation and dispute resolution team. He has appeared at all levels of New Zealand’s judicial system and has represented clients in numerous arbitrations, mediations and negotiations. Geoff advises clients on a broad range of issues and disputes, including insolvency, insurance, construction, financial recoveries and employment litigation. Contact Geoff at geoff.carter@chapmantripp.com
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Senior Associate Vonda Engels advises clients on all aspects of employment law and health and safety. Vonda is a senior associate in our employment team and assists a number of the firm’s key clients on a full range of contentious and non-contentious employment matters. She has represented clients in the Employment Court, Employment Relations Authority and in mediation with the Ministry of Business Innovation and Employment. Vonda also has experience in assisting clients to manage their health and safety risks by providing compliance advice and training. She also has experience in assisting employers with health and safety investigations and responding to prosecutions by WorkSafe. Vonda was a senior solicitor at Chapman Tripp from 2013 to 2015 and has recently re-joined after three years in London where she was in the employment team of major US law firm, Gibson Dunn and Crutcher LLP. Prior to joining Chapman Tripp in 2013 Vonda was a senior solicitor at another top tier New Zealand law firm. Contact Vonda at Vonda.engels@chapmantripp.com or connect via LinkedIn
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