David Burton now leads the Employment Law Team at Mahony Horner Lawyers.  Contact David here.

Last week the long-anticipated Fair Pay Agreements Bill was introduced to Parliament. Consultation on the bill has been ongoing for years.

We have now shifted from broad concepts which were initially debated to the gritty detail of what this will mean in practice. It is now clear that the bill represents a fundamental shift in labour relations in New Zealand.

There has been vocal support for the bill among the unions, and equal dismay among business groups. The changes are so significant, it is important for as many people as possible to give their say on this legislation.

The objectives of the bill are understandable. The bill is intended to address the prevalence of jobs where there are inadequate working conditions, low wage conditions and low labour productivity.

Occupations like cleaners and security workers are obvious targets. However, in scope, the bill could affect all industries and occupations, regardless of whether they are low paid or not.

The new system is a simple concept on its face. Any union may initiate bargaining for a Fair Pay Agreement if it represents at least 1000 employees or 10 per cent of the employees in the proposed coverage.

Once initiated, an employer bargaining side must be formed to bargain for the claim. Individual employers cannot sit at the bargaining table. Instead, “employer associations” will bargain on behalf of their members.

If both sides can reach an agreement, those terms will become the minimum standard which applies to everyone in the coverage clause.

This will be regardless of whether the employee belonged to one of the unions on the bargaining side or not. Similarly, it will apply to all employers with covered workers, regardless of whether they belong to an employer association on the bargaining side or not.

Employees are not allowed to strike for the purposes of bargaining for a Fair Pay Agreement. However, if both bargaining sides cannot reach an agreement, then the Employment Relations Authority can set the terms of the Fair Pay Agreement.

If the authority is required to set terms, there are a range of factors which it must consider. This includes industrial norms and practices and the likely impact on covered workers and employers. The authority “may” consider any likely impacts on New Zealand’s economy, but it is not required to do so.

Such a system is not entirely new for New Zealand. But our labour market and economy is considerably more complex now.

Up until the end of the 1980s, specialised labour courts could set nationwide “awards” for certain industries and occupations. Those awards set minimum rates of pay for certain occupations.

After the awards system was abandoned, only the Minimum Wage Act set minimum rates of pay. Now, however, the authority will have the power to set minimum rates of pay for occupational or industrial sectors.

There are strong views either way on the appropriateness of such a system.

For low-paid workers, the system means that they will have either the same or a better opportunity to negotiate higher rates of pay. It may work to their advantage that these terms could be set by an independent body free from political pressure.

E tū, a union which covers six different industries, including engineering, manufacturing, food and public and commercial services, has described the Fair Pay Agreement as “the best change for workers in decades”.

On the other hand, others may say that decisions of these kinds, which could affect wide parts of the economy, are exactly the sort of decision that should be decided by democratically elected people, accountable to the public (like the minimum wage).

Others may say that these decisions should not be made by a central authority at all.

Business NZ has said that the system will be unlawful and has taken its claim to the International Labour Organisation. During consultation before the bill was drafted, it said it breaches international obligations requiring bargaining systems to allow “free and voluntary negotiation”.

But the issues run deeper than ideological differences. There are a number of questions and concerns regarding how the bill in its current form will operate in practice.

For example, the bill anticipates the appointment of an employer association to be the default bargaining party for employers if no other employer association volunteers.

The obvious candidate was Business NZ, but it has ruled out participating in the system. Who will fulfil this role instead? What happens if business associations boycott the system entirely?

It will be necessary for Fair Pay Agreements to define what work is covered. This is already required for collective agreements, but these have the benefit of businesses knowing what roles exist in the organisation.

But when these agreements apply to all of New Zealand, how will workers who perform a mix of roles be treated under the system?

These are just a sample of some questions. The administrative requirements will also require careful consideration; like how affected parties will be notified under the system, and how parties will vote on the ratification of a negotiated agreement.

After the bill’s first reading, it will be presented to the select committee, where everyone will have the opportunity to give comment on the bill.

These changes are significant, so I encourage everyone to have their say.