The Fair Pay Agreements Bill (“the Bill”) was introduced to Parliament on 29 March 2022 and passed its first reading on 5 April 2022. The Bill provides a framework for collective bargaining of Fair Pay Agreements (“FPAs”) and aims to set minimum pay and conditions for workers across an entire industry or occupation, rather than just between unions (on behalf of their members) and specific employers. 

The Bill creates a framework for bargaining for FPAs by:

  • Explaining the bargaining process;
  • Setting out general and specific duties and obligations that apply to bargaining parties;
  • How parties ought to carry out bargaining and FPA requirements;
  • Providing processes to resolve disputes that may arise during bargaining for an FPA; and
  • Establishing regulation-making powers to give full effect to FPAs bargained under the Bill.

For more information on this framework, please refer to our earlier article Fair Pay Agreements | JB Morrison.

The bargaining process – what does it mean?

A union may initiate bargaining for a proposed FPA if the union is an eligible union and the Chief Executive of the Ministry of Business, Innovation and Employment (“MBIE”) is satisfied that the union’s application meets either of the following tests:

  • Representation threshold of support from 10% or 1000 workers in the proposed coverage (whichever is lower); or
  • The public interest test, which is based on specific criteria such as low pay, little bargaining power, or lack of pay progression for employees within the industry/occupation.

If the application is approved, an employer bargaining party would then be formed to bargain for minimum employment terms on behalf of its members. The Chief Executive must also approve the employer bargaining party before the bargaining takes place.

If one side does not have a willing or suitable representative (or becomes unrepresented during bargaining), it was first proposed in the Bill that BusinessNZ or the New Zealand Council of Trade Unions (NZCTU) would step in as the default representatives for employers and employees, respectively. We understand BusinessNZ has not agreed to fill that function at this time – so there is a significant gap here in terms of that representation.

Proposed policy change  

While it has not made it into the current wording of the Bill, the Government has proposed a “backstop” where no eligible representative is willing or available to represent a bargaining party. Put simply, the Employment Relations Authority (“the Authority”) would step in as the backstop to set the terms of the FPA if there was no eligible representative on one side to engage in the bargaining.

We understand the Government’s main reason for proposing the backstop is to ensure that when bargaining for an FPA has been initiated, an FPA would result. Its aim is to balance this principle with giving parties a reasonable opportunity to bargain.

If this proposed policy change is included in the Bill and the Bill is enacted into law, the backstop could be triggered in the following three circumstances:

  1. Bargaining is initiated for an FPA by an eligible union, but there are no bargaining parties on the non-initiating (employer) side after a set time period;
  2. Bargaining is initiated to replace an existing FPA, but there are no bargaining parties on the non-initiating side after a set time period; or
  3. Bargaining is underway, and parties on the non-initiating side withdraw from bargaining.

As currently drafted, if the default bargaining party did not step in within one month in any of the above scenarios, the backstop could be triggered. However, if all bargaining parties on the initiating side withdraw and the relevant default bargaining party does not step in within one month, the development of the FPA would cease, so the backstop would not be triggered.

If enacted, this proposed change would have significant implications – if the backstop is triggered, the Authority would set terms without bargaining occurring beforehand. 

If the Authority is required to set FPA terms, it would be able to seek out and consider information about a specific industry or occupation or request information from an independent advisor/industry expert. This could aid the Authority, as it would have the potential to further the Authority’s knowledge on how its decisions could impact those affected, especially those who are unrepresented. The Authority would sit as a panel when performing the backstop and have broad discretion to decide its processes. However, the proposed policy change requires the Authority’s processes to include making a binding determination to agree certain topics and including mandatory terms that must be discussed and requested by a bargaining side unless there is good reason not to. If both bargaining sides agree, the Authority may include other terms.

Only questions of law under the backstop process could be appealed, and only those that are party to those proceedings could appeal. For example, employers who are unrepresented in bargaining could not appeal. Non-parties would be able to seek judicial review. The Employment Court would hear any appeals or challenge of the Authority’s backstop determinations, and the Court would appoint a third party to represent the unrepresented side. 

Some things to consider

Of course, the proposed policy change to the Bill and the Bill itself has not yet been made law. But what has arisen are many questions and concerns regarding how the backstop and the Bill will operate in practice. 

Some things to consider are:

  1. How would parties affected be notified under the system, including notification that bargaining has been initiated and notification of progress and outcomes?
  2. How would parties covered by the proposed FPA vote on its ratification?
  3. How would employees who fall under multiple coverages (because they perform a mix of roles, and these roles overlap) be treated under the system?
  4. Given that a broad range of groups would fall within proposed coverages, how would this be managed to give effect to each group’s best interests?
  5. Is there the possibility of allowing additional terms in an individual’s employment agreement after an FPA has been finalised, for example, flexibility in work hours to benefit both employee and employer?
  6. How would the Authority find the time and capacity for the additional “backstop” function? Will additional and/or specialist members be appointed?

There are already strong views in support and opposition to the Bill and proposed backstop policy, which is not surprising since the Bill represents such a fundamental shift in labour relations in New Zealand. Consequently, as many people as possible need to have their say on the proposed legislation. The Government has welcomed public views on the proposed policy change as well as the Bill and gives you an opportunity to present your opinions before the Select Committee, with submissions due by 11.59 pm Thursday, 19 May 2022.

For more information

If you would like to understand more about the Bill, the government’s proposed policy change, how this could impact you or your organisation if enacted into law, and/or if you would like assistance preparing a submission, please feel free to contact us on 04 472 0020.

Fair Pay Agreements | JB Morrison Lawyers