Further consultation on the Fair Pay Agreements system - your submissions sought

Tuesday 29 October 2019

Author: Liz Coats

​​​​The Government is now seeking feedback from businesses, employees and the public on options for the design of its intended Fair Pay Agreements (FPA) system.1​​

Feedback is sought in the form of responses to 98 questions regarding aspects of how a FPA system could work in practice, which are set out in a Government discussion paper (the Discussion Paper).

What is an FPA?

An FPA would be an agreement setting out minimum standards particular to a specific occupation and sector. These minimum standards would go beyond those already set out in our employment legislation, and would relate to matters such as wages, redundancy, overtime, and working hours. A FPA would be agreed through bargaining, and would then become the legal requirement across specified occupations in that sector.

The process to date

The feedback process follows the Fair Pay Agreement Working Group Report (the Report), which was delivered to the Government in December 2018 and released to the public in early 2019.

As we reported at the time, the Report was just the first step towards FPA legislation, and the Government indicated that further analysis and consultation would be required before any FPA Bill would be introduced. The Discussion Paper, and request for specific feedback, is the next step in that process but it is fair to say that there is still a long way to go before any draft legislation takes shape.

Who should be interested in the Discussion Paper?

The Government has highlighted certain groups that are likely to be particularly interested in contributing submissions in response to the Discussion Paper. These groups include union representatives, industry bodies, consumer advocates, and advocates for groups of workers who could be particularly impacted by FPAs.

In terms of employers, the Government has highlighted that the Discussion Paper is likely to be particularly relevant to employers that operate in sectors where businesses compete on low wages and working conditions, or where there are recognised to be “poor outcomes for workers" that might benefit from greater coordination across the sector.

Key issues relating to FPAs

The Discussion Paper explores options and raises questions for feedback in six key areas.

1) Initiation of bargaining

Some of the most complex issues relating to FPAs relate to how the bargaining process can be initiated, including who can initiate bargaining, and the threshold that workers must satisfy across a sector before they can initiate.

The starting point under the FPA model is that workers (which would not just be limited to employees) can initiate FPA bargaining. However, the Discussion Paper seeks feedback on whether employers should be able to do so as well.

As to the threshold for initiation, the Discussion Paper seeks feedback on:

  • the appropriate representation threshold for workers to initiate bargaining – and in particular, whether the test should be set at 10% of affected workers or some other threshold (e.g. a fixed numerical threshold), and how to measure whether that threshold has been reached, and

  • the public interest test –  in particular, the factors to take into account in determining whether that test is reached, and whether a public interest test and representation test would need to be satisfied before bargaining could be initiated.

2) Coverage of FPAs

Given that an FPA would apply across an entire sector and occupation, defining that sector and occupation with precision is obviously going to be important (and there is scope for significant dispute “around the edges" of any FPA coverage definition).

Some of the questions raised in the Discussion Paper relating to coverage include whether employers should be able to obtain a temporary exemption from an FPA in certain circumstances (e.g. where an employer could face going out of business if they were required to comply with an FPA), whether the parties can negotiate regional variations in the minimum terms of an FPA, and whether it should be possible to have region-specific FPAs.

3) Bargaining

This section of the Discussion Paper outlines an option for the scope of an FPA (in terms of the terms and conditions it could contain), who the representatives in bargaining could be, and the support that would be required for bargaining to be an efficient and effective process.

As to the representatives in bargaining, the Discussion Paper states that unions and employer representatives would be the “logical" representatives for workers and employers in FPA bargaining. (This, of course, could raise issues for workers who are non-unionised and/or employers who do not participate in any industry bodies).

The Discussion Paper also considers options for how the (likely to be significant) costs arising from the FPA bargaining process could be shared. This could include bargaining fees imposed on workers and employers alike, costs lying where they fall, and the possibility of the government meeting certain costs (e.g. flights, catering, venue hire).

4) Dispute resolution

The Discussion Paper seeks feedback on whether it makes sense to use the existing dispute resolution framework available in our employment relations system for disputes that arise concerning FPAs (that is, mediation services, the Employment Relations Authority, and the courts). It also notes that there is a possible need for some form of government-appointed “navigator" to assist the parties to FPA bargaining through that process, which would be distinct from the existing services available.

One of the most controversial aspects of the Report was the view that if parties to FPA bargaining cannot reach agreement, a public body would likely be required to determine the terms and conditions. (Some noted – with concern - the similarity between this approach and the award system that applied prior to 1991). The Discussion Paper seeks views on how the dispute resolution process could be managed and possible appeal rights.

5) Anti-competitive behaviour

The Discussion Paper notes the risk that FPAs could contribute to anti-competitive behaviour within a sector (given that it would effectively impose minimum standards across all employers in that sector). To address this concern, the Discussion Paper raises the possibility of establishing an independent government body to analyse an FPA for potentially significant negative impacts – and seeks feedback on this and any other option that could be used to safeguard against anti-competitive outcomes.

6) Concluding an FPA

Finally, feedback is sought on the process for moving from a bargaining FPA through to a set of minimum terms and conditions that apply across workers and employers in a particular sector. This raises some intensely practical questions, such as how to conduct a ratification vote, the percentage of support that would be required for ratification to occur, and how the terms of an FPA could be enforced.

Where to next?

Submissions in response to the Discussion Paper are due by 5pm on 27 November 2019. It is not necessary to provide feedback in response to all of the issues; and feedback is particularly sought on the potential impacts (in terms of costs and benefits) of the different options in each section.

Officials from the Ministry of Business, Innovation and Employment (MBIE) will collect all submissions received by the closing date. The next step will be for MBIE to analyse the submissions and then develop final proposals in relation to FPAs for the Government to consider.

It remains to be seen whether there will, in fact, be any FPA legislation proposed during the current Government term.

MBIE have also released a discus​sion paper seeking feedback on how to address the exploitation of migrant workers in New Zealand workplaces. Submissions in response to the discussion paper close 5pm 27 November 2019. ​

If you ha​ve any questions on the proposed reforms, or would like assistance with the preparation of a submission, please get in touch with the contacts listed or your usual Bell Gully advisor.​​


1https://www.mbie.govt.nz/have-your-say/designing-a-fair-pay-agreements-system-discussion-paper/​


Disclaimer

This publication is necessarily brief and general in nature. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.

For more information
  • Liz Coats

    Partner Auckland
  • Rachael Brown

    Partner Wellington
  • Tim Clarke

    Partner Auckland
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