The recent report back of the Select Committee on the Fair Pay Agreements Bill highlights a glaring gap in the framework – no party has been willing or able to put their hand up to be the default employer representative in bargaining.

Following the decision taken by Business NZ last year to decline this role, the Minister of Workplace Relations and Safety commissioned a paper to address what would happen in the event that no party was willing to represent the non-initiating bargaining side. 

The fact that this issue needed to be addressed at all is a concern, given that it generally takes at least two parties to negotiate an agreement and a party who is not represented will surely struggle to get a fair deal.  But, it is not an unlikely scenario given that the Bill assumes that employer associations will represent employers, yet none exist in many sectors, and those that do are likely to have the capability and experience to undertake this level of bargaining effectively.

The papers recommendations, which were considered by the Select Committee and incorporated into the Bill, proposed introducing a “backstop policy”.  In short, the backstop, where a bargaining side is not represented, is that the initiating party can apply directly to the Employment Relations Authority to set the terms of the Fair Pay Agreement.  This means that the lack of representation will not get in the way of terms being set, and the Authority will run its process with or without the involvement of any affected employer.

This adds to the already extraordinarily wide powers of the Employment Relations Authority in relation to fair pay bargaining and sets a low bar for judicial intervention.  It also cuts further into the ability of the parties to determine their own terms and conditions and means that an external investigative body will take on this role without any specialist knowledge of the sector or industry. 

This is reflected in the change to the stated purpose of the Bill which was originally to “provide a framework for collective bargaining for fair pay agreements that specify industry-wide or occupation-wide minimum employment terms” and is now “to enable employment terms to be improved for employees by providing a framework for bargaining for fair pay agreements that specify industry or occupation-wide minimum employment terms; or in certain circumstances, for the Authority to determine those minimum employment terms”.

The difference is subtle but significant – the new wording highlights that bargaining may not in fact occur at all, and instead the Authority will determine the terms of the “agreement” from the outset.

The other notable aspect of the Select Committee’s recommended changes to the legislation are the new provisions which set out how a default bargaining representative may elect to become involved in the bargaining, including the requirement for the approval of the Chief Executive of MBIE, and the range of situations within which this may occur. 

The Bill now contains a very detailed and complex series of provisions dealing with this part of the process, which could be viewed as a vast over complication to cover the fact that the original solution, (Business NZ), opted out.

As currently drafted, the Bill still allows for Business NZ to step in, if it chooses to, but this is voluntary and that organisation is not expressly named in the legislation.  Instead the Bill provides that the Minister may approve a party as a default bargaining representative if satisfied that they are “the most representative organisation of [unions or employers] in New Zealand”.  

Realistically only the NZCTU could fill this role for employees and unions, whilst only Business NZ could be described as such in respect of employers.  The obscurity in the Bill on this issue likely reflects the stance taken by Business NZ and the uncertainty as to what, if any, role it may be willing to take.

The net effect of the Bill is that employers could become bound by terms established by Fair Pay Agreements without having any representation or involvement in either the bargaining, or the Authority, process.  In a system designed to level the playing field for unions and employees, it is arguable that it has swung too far the other way.