At the beginning of May, the Government announced their proposal for a Fair Pay Agreement System. If enacted, this will be a significant overhaul of employment relations law in New Zealand.
A Fair Pay Agreement Working Group was set up in June 2018 to make recommendations on the design of an ‘industry level’ bargaining system. The Working Group recommended setting a relatively low barrier of entry to initiate conversations and to avoid making the FPA system too hard to access – particularly in sectors where there may be a low union presence and therefore a “greater need for intervention.”
These Fair Pay Agreements (FPAs) are similar to the awards system used in Australia and introduce industry-wide sets of minimum terms and conditions which employees in a particular industry would receive. The agreement does not prevent bargaining between employees and employers within an industry for more favourable terms and conditions for employees.
Under the FPA system, unions can initiate an FPA if 1000 workers or 10 per cent of the workforce in an industry support the change. In addition, there is also access to bargaining under a public interest test in industries or occupations where “employment issues exist, such as low pay or limited bargaining power”[1].
Once an FPA is initiated, a bargaining process starts. If the parties agree a deal, the proposed FPA will be vetted and voted on by employers and employees covered by the new deal. An FPA will only come into force if it receives greater than 50 per cent support from employees.
If the parties can’t reach agreement during the initial bargaining process, a dispute resolution process will follow to help further bargaining, including mediation. If no agreement is reached at mediation, the Employment Relations Authority (ERA) can make a decision on the terms and conditions to bind both parties.
What happens next?
- A draft version of the Bill will be released (intended for November 2021), and the public will eventually have an opportunity to comment on the Bill during the Select Committee process.
- The Ministry of Business, Innovation and Employment and the ERA will support the implementation of FPAs.
- The Government also plans, over time, to set up a new institution, similar to the Australian Fair Work Commission, to arbitrate over disputes and provide general governance over the new system.
- The New Zealand Council of Trade Unions and BusinessNZ is due receive $250,000 per annum for the next three years to “support their role in coordinating Fair Pay Agreements, identifying bargaining parties and raising awareness about Fair Pay Agreements and the bargaining process”[2].
Additional Sources
If you have questions about the proposed system, you can find more detailed information and timelines on the websites below. Or you can contact a member of our Commercial Disputes & Employment team by email: [email protected]
MBIE – https://www.mbie.govt.nz/
NZCTU – https://www.union.org.nz/
Business NZ – https://www.businessnz.org.nz/
[1] Ministry of Building Innovation and Employment “Government announces Fair Pay Agreement System” (7 May 2021) https://www.mbie.govt.nz/about/news/government-announces-fair-pay-agreement-system
[1] Ibid