Fair Pay Agreements – much more than about pay
More detail about the Labour-led Government’s election promise to introduce “fair pay agreements” to New Zealand is now out. There are more questions than answers at this stage but here’s what you need to know so far.
What are Fair Pay Agreements?
It is intended that Fair Pay Agreements (FPA) will lift wages and productivity in New Zealand by setting industry wide pay and work conditions through a system of collective bargaining.
This was referenced during last year’s election campaign. On 5 June 2018 the Minister for Workplace Relations and Safety, Hon Iain Lees-Galloway, announced that a working group, chaired by (former National Prime Minister) Rt. Hon Jim Bolger, has been set up to make recommendations on the design of such a collective bargaining system.
Once the framework for this system is in place, it will be up to workers, employers and unions to negotiate towards FPAs specific to their industry or sector. A distinguishing feature from the current system is that during the proposed negotiation framework for FPAs industrial pressure in the form of strikes and lockouts will not be available. However, the most notable point from the announcement is that FPA terms (including pay rates) would ultimately be able to be imposed on workers and employers in an industry by an arbitrator (or similar mechanism).
What’s the problem the Government is seeking to address?
We already have a number of legislative minimum employment standards that apply to all employees. These include minimum wage rates, annual, sick and bereavement leave, entitlements for working on a public holiday, extra pay for being available to work or compensation when shifts are cancelled, protection for employees when businesses are restructured and minimum rest and meal break provisions.
However, the media statement from the Minister of 5 June conveys that more is needed:
“The aim of FPAs is to prevent a race to the bottom, where some employers are undercut by others who reduce costs through low wages and poor conditions of employment.”
Will Fair Pay Agreements only apply to employees?
Put simply, this is currently up for debate. In accordance with the Terms of Reference one of the areas that the Working Group must address is whether the FPA system will apply to all employees of an industry or sector regardless of their union membership status. Another question is whether the system will apply to a broader group of workers, such as contractors. If it is a broader group of workers (which could include non union employees and/or contractors) then the scope of this new collective bargaining system and the implications for businesses could be considerable.
Collective bargaining and collective agreements in New Zealand have been a part of the employment law landscape for a long time. However, these only apply to employers and employees (not contractors). In contrast, under FPAs, it seems that the government has a desire to expand the new FPA collective bargaining model to all ‘workers’ in an industry (which is also a term also used in the new health and safety legislation to include contractors) regardless of union membership status or contractor/employment status.
What should businesses do?
The Working Group is due to report back with recommendations by the end of this year.
For now, employers will need to continue to work under the current legislation and bargaining framework. However, once established, an FPA could set new levels of minimum pay and conditions applicable to a whole industry regardless of the document which governs the worker’s engagement. If this was to occur, it is likely that separate multi-employer/multi-union collective agreements, individual employment agreements and contracts for services would still exist but the terms and conditions contained in those agreements could not be less than those contained in an applicable FPA. What is not clear is how any inconsistencies between FPAs and the terms of those other agreements might be addressed or resolved.
Given the sparsity of detail about how exactly this new FPA bargaining model will work businesses should be thinking about the questions they need answers to now. The chief executives of Business NZ and Hospitality NZ are on the working group so this is an opportune time for businesses to engage with them or their local chambers of commerce on this, including to raise any issues of concern and make suggestions.
Please contact a member of our team if you would like further information or other assistance with this.
Who can help
Partner - Dispute Resolution and Litigation
Aaron is a partner in the firm’s dispute resolution division. He advises clients on a range of litigious and risk related matters, with particular expertise in the areas of white collar criminal and regulatory affairs, sports law and employment law. Aaron leads our sports law practice, and is a member of the firm’s health and safety and public law teams.
Aaron is well regarded by clients for his ability to analyse and strategise complex situations. He is recognised by both clients, and his peers, for being able to implement pragmatic and commercial strategies to minimise risk and create opportunity for our clients. His ability has resulted in clients avoiding significant litigation and commercial consequences.
In 2017 Aaron was named by Chambers & Partners (Asia Pacific) as one of New Zealand’s leading sports lawyers, and has been recognised for his employment and sports law expertise in other legal directories including Asia-Pacific Legal 500 and Who’s Who.
Before joining MinterEllisonRuddWatts Aaron practiced as a barrister with Paul Davison QC, and has lectured at the University of Auckland.
Partner - Employment
Gillian is an experienced advocate with a pragmatic approach that is highly valued by clients. She helps clients manage risks and protect business proprietary interests. Gillian negotiates executive severance arrangements and represents clients in personal grievance claims through all levels of the New Zealand court system.
Her broad employment practice includes advising on restraints of trade and protection of confidential information; industrial relations and collective bargaining matters; restructuring programmes including outsourcing, redundancy and consultation processes; and health and safety matters.
Gillian is an internationally recognised employment law specialist, with significant experience practicing in top tier law firms in New Zealand, Scotland and England.
Partner - Employment and Public Law
Megan leads both the public law team and the Wellington employment team and acts for both public and private sector clients. She has practiced law for over 20 years in top tier firms in New Zealand, Australia and London, and sits on the partnership’s board.
Her practice traverses strategic, litigious and time-critical day-to-day advice on all aspects of Public law and Employment related law. Megan regularly acts for numerous government departments and crown entities (including central government education agencies).
Bringing significant experience to all employment related matters, Megan regularly advises on drafting employment agreements and HR policies, managing poor performance, restructuring and redundancy, disciplinary investigations and dismissals, leave entitlements, minimum standards compliance, secondments, fixed term employment, KiwiSaver, collective bargaining, independent contractor arrangements, establishing business in NZ and recruiting staff, and restraints of trade and other post termination obligations.
As a recognised expert in Employment law, Megan is on the Editorial Boards of employment publications and is also the co-author of the Laws of New Zealand Employment chapter. As a recognised expert in Public Law, Megan is also an external member of the Legislation, Design and Advisory Committee (which is an appointment by the Attorney General).
Megan is also a Public Law expert and advises on exercise of statutory powers, legislative drafting, discrimination and judicial review proceedings, risk management and legal compliance and governance.
Megan’s leading expertise across Employment and Public Law is consistently noted in independent national and international peer guides, including Chambers Global and Chambers Asia Pacific.
She also has specialist expertise in PPPs having acted for the Ministry of Defence (UK) on their defence procurement and Railtrack plc on the privatisation of the UK railway.
Special Counsel - Employment
Emma, a Special Counsel in the Wellington Employment team, has been with the firm since 2002. Emma undertakes a wide variety of work in the areas of employment law, health and safety, public law and education law.
Emma’s areas of expertise span both contentious and non-contentious issues, including drafting employment documentation, representing both private and public sector employers at mediation, the Employment Relations Authority and the Employment Court, and providing legal opinions on employment, health and safety, and public law issues.
Emma assists clients with employment due diligence and provides advice on all employment-related aspects of taking on new staff, or buying or transferring a business. She also assists clients with employment issues arising in the context of receiverships. Emma has extensive experience assisting employers to carry out restructuring, poor performance and disciplinary processes.
Senior Associate - Employment
Chris has extensive experience advising corporate clients on a wide range of employment and health and safety matters.
With a background in commercial litigation, Chris regularly represents clients in mediations and in proceedings before the Employment Relations Authority and the courts. He advises on all employment related matters, including statutory compliance, restraints of trade, disciplinary investigations, restructuring processes, personal grievances, poor performance, leave entitlements, employment agreements and policies, industrial relations, and workplace health and safety.
Senior Associate - Employment
June has broad experience in all aspects of both New Zealand and English employment law. June regularly advises on senior executive appointments and terminations; restraints of trade and protection of confidential information; performance and disciplinary processes; restructuring, redundancy and outsourcing programmes; industrial relations and collective bargaining matters; whistleblowing and protected disclosures; and employee data privacy issues. June has been involved in litigation at all levels of the New Zealand court system, both in relation to substantive disputes and urgent interlocutory matters. June has significant experience in acting for both private and listed companies in the financial services, pharmaceutical and healthcare, and food and beverage sectors.
June recently returned to New Zealand, having practiced at a magic circle firm in London for several years, and at another top tier New Zealand law firm prior to that. During her time in London, June regularly advised leading private equity houses and FTSE100 companies on employment law and regulatory issues.