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Fair Pay Agreements bill becomes law

Making history

New Zealand’s Fair Pay Agreements Act came into effect on December 1st.

On 26th October, in one of the biggest shifts in employment relations in decades, Labour satisfied their 2017 manifesto commitment by passing the Fair Pay Agreements Bill. It was blocked by New Zealand First in their previous term. The law passed after vigorous debate with frequent interruptions and emotional speeches, before a gallery packed with triumphant unionists.

The FPA Act creates a framework for collective bargaining across entire industries or occupations, rather than just between unions and a particular employer. This would involve sector-wide awards determining minimum pay and conditions for workers. In certain circumstances, the Employment Relations Authority (ERA) will determine those minimum employment terms – meaning “agreements” could be established without employers being involved at all.

The Act is invoked by support from the lesser of 1,000 workers or 10% of a workforce, or by meeting a public interest test. People do not need to be union members to count towards those tests and they do not need to join a union to be covered by a FPA.

The Ministry of Business, Innovation and Employment (MBIE) and the ERA are being funded with the expectation of approving about six FPAs per year.

Good for all employees or giving the minority a big stick?

Workplace Relations Minister Michael Wood announced the law saying “We are ending New Zealand’s 30-year failed experiment with a low-cost labour model”, referring to the National government’s 1991 Employment Contracts Act that reduced workers’ union bargaining power. Wood said that law resulted in lower wages and failed to increase productivity, while ACT Party small business spokesman Chris Baillie pointed to data showing a gradual improvement.

Wood said the legislation was about supporting the most vulnerable workers, appealing to the pandemic by pointing to the essential workers who had “kept us safe through Covid-19”. It would stop a “race to the bottom” where employers were inclined to drive wages and conditions down to stay competitive. Earlier this year he said one of the Government’s key workplace priorities was to avoid wage competition.

National and Act vehemently opposed the FPA bill, saying it was “compulsory unionism” and “old-fashioned socialism”, and vowed to repeal it.

National Party workplace relations and safety spokesman Paul Goldsmith said the only way to higher wages was through a productive economy, that FPAs would harm. “Fair Pay Agreements will make New Zealand’s workplaces less agile and flexible and make all workers beholden to a union agenda. It will force employers and workers within a sector to bargain for minimum terms and conditions for all employees in that industry or occupation, regardless of whether or not they want to be included.”

Baillie said the bill would take away the rights of workers to “plan their own destiny”. He claimed the law was a misnomer, being neither fair nor a matter of agreement when half a percent of the workforce could force an agreement against the wishes of the rest (for instance 1,000 workers in a sector of 200,000). He said it is “unionism by stealth”, “bullying” and “threatening already overburdened business owners with bureaucratic nonsense and ridiculous conditions”.

He also criticised the law for singling out Māori for special consideration. Each bargaining side must “use its best endeavours” to ensure effective Māori representation by “seeking and considering feedback from representatives of Māori employees” and consider whether those bargaining should include a person representing the interests of Māori employees.

Edwards Law released a statement criticising FPA’s “It will be illegal to contract out of an FPA, even if an employer and an employee both want to.” 

In a statement BusinessNZ Director Katherine Beard said they’ve never supported FPA’s and will make resources available for employers who may face bargaining.

“We are aware that the scales are massively stacked against small businesses, and they will need all the help they can get if a union comes knocking on their door to set up a Fair Pay agreement” said Beard. 

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