Despite strong pushback by BusinessNZ and employer groups, the Government is forging ahead with its Fair Pay Agreements (FPA) legislation. The report of the Select Committee is due back on 5 October and it is anticipated that the Bill will be passed by the end of this year.
The Select Committee process is the last opportunity to consider substantive changes to the proposed framework. Nearly 2000 submissions were made on the Bill, and it is now for the Select Committee to make final recommendations before it returns to the House for its second and third readings.
The original draft of the Bill highlighted some significant issues and fishhooks that will need to be carefully considered by the Select Committee if the legislation is going to be achieve its objectives. Some of the key issues are set out below.
Representation of bargaining sides
A significant “hole” in the current Bill is who will represent the employer bargaining side where there is no existing employer association? BusinessNZ has refused to be responsible for this part of the process and has made its opposition to the Bill clear, leaving no obvious alternative to fill the role of default employer representative.
This is a significant problem given the scale and complexity of the bargaining process. There will potentially be hundreds or even thousands of employers who will become bound by what is negotiated “on their behalf”, and without an effective advocacy body they may struggle against the experience and skill of union negotiators.
The Bill currently relies on a “chain of notification” approach which is intended to provide for all covered employers and employees to be notified of any initiation of bargaining that may affect them. However this is an inherently unreliable approach because without a centralised database of employers and employees, it is almost a certainty that there will be businesses and employees who are not made aware of the bargaining until after an FPA is ratified.
This is especially an issue for employers who will become bound by minimum standards that they have no influence in setting.
Currently independent contractors are not covered by the Bill. However, the Government has indicated an intention to bring them within the scheme at some stage. The Bill does include a provision relating to independent contractors and penalties for employers who engage people as contractors instead of employees to avoid their FPA obligations.
The lack of inclusion of independent contractors in the Bill is a cause for significant concern for unions and the Human Rights Commission. There is a practice of misclassifying workers as contractors in certain industries, and without coverage in the Bill, these workers will be shut out of FPA protections.
In New Zealand it is common for more than one union to represent members in the same occupation or industry. This creates an issue as to what happens where two or more different FPAs cover the same groups of employees.
In the case of overlap, the Bill allows for the Employment Relations Authority to determine which agreement will apply to employees by assessing which provides the better terms for the majority of the employees who are within coverage of both agreements.
The consequence of the Authority unilaterally deciding which FPA prevails is that some employees and employers could end up bound by an agreement that is not suited to their particular work environment.
Voices of small businesses drowned out
A significant concern for small and medium employers is large businesses drowning out their voices in the ratification process. Small businesses represent approximately 97% of businesses in New Zealand, but only account for 29.3% of employment.
Under the FPA system, employer voting power is based on the number of employees in the business. Small businesses are afforded a modest uplift in votes. However, this uplift is unlikely to be sufficient to ensure that small businesses are represented adequately during the ratification process.
This may result in small employers feeling disenfranchised by the FPA process and that their participation is not worthwhile. It may also result in these employers becoming bound by FPA terms which are either unsuitable or unaffordable.
Views of NZCTU and BusinessNZ
As members of the Future of Work Tripartite Forum, both NZCTU and BusinessNZ participated in the Fair Pay Agreement Working Group which provided recommendations on the Bill to Government in 2018.
Unsurprisingly, as the representative of unions comprising a total of 300,000 people, NZCTU is strongly in favour of the FPA system. It made an extensive submission on the Bill, suggesting some tweaks to certain parts of the Bill to provide better protection for employees.
However, BusinessNZ is strongly opposed to the Bill, querying the existence of the ‘race to the bottom’. It has centred its opposition on the argument that the FPA Bill is in breach of the International Labour Organisation’s (ILOs) Right to Organise and Collective Bargaining Convention 1949. BusinessNZ is now waiting on its case to be heard by the ILO’s tribunal later in 2022. In the meantime it has continued to be a vocal critic of the Bill and has avoided making any public commitment to engagement in the FPA scheme.
The objectives of this Bill serve an important purpose in providing a more even platform for collective bargaining in New Zealand. However, work is needed to iron out these issues in order to make the Bill workable and to obtain sufficient general support for it to be effective in practice.