The Fair Pay Agreements Bill was introduced into Parliament on 29 March 2022 and is currently continuing through parliament’s Select Committee process. The Bill provides a framework for bargaining for fair pay agreements (FPAs). It is expected to receive royal assent later this year and it will come into force one month after it does so. Given that implementation of this legislation is a key government policy, we expect the Bill to pass through the parliamentary process without significant change.
The purpose of the fair pay legislation is to enable collective bargaining across entire occupations or industries. It therefore has the potential to affect any employer in any occupation or industry. Whilst FPAs may initially have been intended to increase the base wages of vulnerable or lowerpaid employee groups such as cleaners or support workers, the Bill does not limit FPAs to such workers.
Instead, the only threshold for initiating bargaining is that 1,000 covered employees or 10% of all covered employees support initiating bargaining (or a public interest test is met). It does not matter whether the employees are union members or what their remuneration is. Only a union may initiate bargaining for an FPA, as long as it has members who would be covered by the eventual FPA. In theory, any group of workers, including high-earning salaried workers, could organise themselves to meet the threshold and form a union, or join a union, to initiate bargaining for an FPA.
Consequently, any employer could inadvertently be expected to participate in the bargaining process and irrespective of whether they did so, have industry-wide minimum employment standards, including remuneration, set for their employees.
Key points of the legislation
The Bill is very detailed and in its present form is about 160 pages long. The following is therefore necessarily only a very high level explanation of the key points.
Where an FPA is negotiated and ultimately ratified, the FPA will apply to every employer and every employee engaged in the industry or occupation that is covered by the FPA. Such coverage will occur automatically (with no way for employers or employees to be excluded) and will include workplaces where no unions are involved and nobody is a union member. If the bargaining does not result in an FPA, the Authority will ultimately fix the terms of the FPA.
During the course of the bargaining process, the legislation provides for unions to arrange two paid meetings for workers who will be covered, and to enter workplaces to discuss matters related to FPAs with employees, who will continue to be paid during such discussions. These provisions are similar, and additional, to the rights that already exist in the Employment Relations Act.
If the terms of the FPA are more favourable than in employment agreements (whether collective employment agreements or individual employment agreements) the FPA term will prevail and the employment agreement deemed to be amended accordingly. The FPA will not prevent or replace workplace bargaining.
Only unions can initiate an FPA process and will set out the work they want covered in an FPA when they do so. The FPA will then be negotiated by a union or unions and employer bargaining parties which comprise one or more employer associations. Individual employers (or employees) will not be part of the bargaining.
The Bill defines an employer association as a registered incorporated society with at least one member that is an employer covered by the FPA and that has a purpose that enables the Association to promote the collective interests of covered employers for the purposes of an FPA.
Consequently, for employers to participate in the FPA process they will need to form or be members of registered incorporated societies with other employers in their industry. A policy amendment by the Government since the Bill was introduced, which will be included in the legislation, indicates that if there is no bargaining party (for example, no relevant employer association is formed that could be a bargaining party, or existing employer associations choose not to be involved in the FPA), the terms of the FPA will be fixed by the Employment Relations Authority without their input (but before the FPA is referred to the Authority, Business NZ will have a month to decide if it will step in). There are very limited rights to appeal the Employment Relations Authority’s determination of the FPA’s terms.
In short, once the Fair Pay Agreements Bill is enacted and comes into force, affected employers or industries who choose not to be involved in bargaining for an FPA should expect to have terms and conditions imposed on them. It is therefore in employers’ interests, even if they object in principle to FPAs, to take steps to ensure their views can be represented.
If you are interested in finding out more information about the new legislation, please don’t hesitate to give us a call.