The passing of the Fair Pay Agreements Bill yesterday afternoon could be one of the most momentous changes to New Zealand’s employment relations landscape in years. So what’s it all about?
On Monday, many (but not all) New Zealanders enjoyed a day off for Labour Day. The public holiday was first celebrated on October 28, 1890 in commemoration of the struggle for an eight-hour working day – a colossal win for workers at the time.
Fittingly, in a historic moment for employment rights in Aotearoa, the not uncontroversial Fair Pay Agreements Bill passed 76 votes to 43 in its third and final reading in Parliament just two days after the public holiday.
Since the introduction of the bill in March this year, the more casually named FPA has found embrace among unions who see potential to improve working and living conditions for workers, meanwhile it’s received a mostly icy reception from employer associations who believe it will create additional complexity, cost, disruption and reduced flexibility.
Ahead of the passing of the bill yesterday, workplace relations and safety minister Michael Wood acknowledged the years of work done by the late trade unionist Helen Kelly in pushing for the Labour Party to adopt the policy. Later, Wood directed focus toward “those who clean, those who care, those who drive, those who serve, workers who for thirty years have been left out in the shadows of our deregulated labour market”. Reflecting on the collective gratitude toward essential workers throughout the past three years of the pandemic – cleaners, bus drivers, supermarket workers, nurses and teachers – Woods signalled the influence of that period on the creation of the bill. “It’s time to recognise the work of those people,” he said. “We are one step closer to making work fair.”
As the wheels start properly turning on Fair Pay Agreements, we’re likely going to start hearing a lot more about them. In fact, many of us will end up taking part in the processes surrounding them. So it’s never been a better time to brush up on the basics.
What is a Fair Pay Agreement?
In short, the aim is to create a “floor” of minimum rights for employees in particular industries. It could cover wages, guaranteed breaks, holidays, pay increase pathways, secure hours, processes for dealing with bullying and sexual harassment, health and safety, resolution processes, staffing levels, penalty rates, meal allowances and more.
Fair Pay Agreements will bring together employers and unions within a sector to collectively bargain for minimum terms and conditions for all employees in that industry or occupation. In practice, the legislation will create legally binding documents, agreed to by employees and employers, setting out a minimum pay and conditions across a sector.
Seems like a big shake up!
It definitely is a big shake up, but at the same time it kinda isn’t. We’ve had similar systems in the past. While negotiating your own individualised contract has become a taken-for-granted part of working in Aotearoa, that hasn’t always been the case. Before the 1991 Employment Contracts Act, New Zealand had a similar system of “national awards” that gave whole industries baseline pay and conditions, which was removed in favour of the system we have now where employees are on individual contracts, or single-employer collective agreements. Over in Australia, a similar system of “industrial awards”, as they call them, grants all wage earners in a particular industry the same minimum pay rates and conditions.
Who will this cover?
In the future, a Fair Pay Agreement could absolutely cover you if you’re an employee. There’s a possibility that the majority of New Zealand workers will eventually be covered by an FPA. However, while there’s no prohibition on any particular occupations creating a Fair Pay Agreement, the legislation is geared toward low paid industries. “It’s these low paid occupations that really need support, and lack collective bargaining,” says CTU President Richard Wagstaff. “So I think the effect will be mostly for low paid people.”
What kinds of benefits could these Fair Pay Agreements have?
The government views the system as a necessary correction to 30 years without sector-based bargaining, which it believes has had a negative impact on productivity and helped to increase inequality across the country by way of a shrinking share of the country’s earnings trickling down to workers. In a press release earlier in the week, Wood said the legislation will work “to stop the race to the bottom and ensure that some of our lowest paid workers get a fairer deal. This completes a key 2020 election commitment and speaks to our focus on improving life for working people in New Zealand.” During the third reading, deputy prime minister Grant Robertson addressed employers, saying, “if you’re a good employer this is good news, you’re not going to be dragged down by those who want to undercut you”.
In response to the passing of the bill yesterday, Wagstaff called it “the most significant piece of legislation in employment relations for a generation.” Fair Pay Agreements, he said, will be especially significant for low waged workers. They are “a really important step, not just for workers in those industries, but actually for those industries as a whole, so they can lift themselves up and be more attractive workplaces for recruiting staff and retaining them.”
So will everyone be pleased about this?
Not at all. As mentioned above, employee groups and business associations have roundly criticised and even spent money on campaigns against FPAs – to significant criticism. Both National and Act have made it their priority to repeal the legislation if they make it into government in next year’s election.
In a press release National Party spokesperson for workplace relations and safety Paul Goldsmith said, “These mis-named agreements will reduce flexibility, choice and agility in our workplaces, at the very time when we need to be agile in a competitive world”. In a separate press release from yesterdsy, ACT’s Small Business spokesperson Chris Baillie said, “ACT has a simple message for unions salivating over Fair Pay Agreements: Don’t bother. Fair Pay Agreements will be gone before the ink dries”.
How will this work?
Once FPAs gain royal assent (likely on December 1), there are about five steps from start to finish. If you’re wanting to take part in the process, get in touch with the union which covers your industry (Hint: type “[type of job you do] union NZ” into Google) or the business association which covers your sector.
- Unions will initiate the process by gaining either 1000 signatures or 10% of employees in a sector (whichever is lower) to agree. Or, the union needs to demonstrate there is significant public interest in the initiation of an FPA. The unions of various industries have already begun collecting enough signatures and authorizations to get the wheels moving.
- All employers in a sector are informed that the FPA process has begun. Those employers will then ask their employees if they agree to share contact information with the unions leading the process. The unions will then get in touch with those who agree to see what they’d like included in an FPA.
- Bargaining will begin with unions representing employees and representatives chosen by employers. The two sides will negotiate what should be in the FPA with some topics mandatory to agree upon and others only mandatory to discuss. Within this there is an obligation to ensure representation of Māori employees and employers.
- Once employees and employers have reached an agreement, everyone in the sector will vote on it. The final Fair Pay Agreement for a sector will require majority support from both employees and employers, but will be limited to two rounds of negotiation. The conditions agreed upon will be vetted independently by the Employment Relations Authority and MBIE to ensure the terms are lawful. If the bargaining breaks down then the Employment Relations Authority will step in to decide on the final terms.
- Eventually, implementation will happen by way of secondary legislation.
Will I have to join a union?
Despite ACT’s Chris Baillie describing FPAs as “compulsory unionism” in a press release, the FPA bill stresses voluntary membership of unions – meaning there can be no requirement for employees to be union members in the process. You can, however, absolutely join a union if you would like to.
When’s all this meant to happen?
The Fair Pay Agreement system is expected to commence shortly after the Bill has passed, likely in December. It’s estimated that the process from bargaining to a finalised Fair Pay Agreement could take around a year.
So the legislation has passed, are there any obstacles to this now?
There are unknowns surrounding how the system will keep up with the additional work that will come with the FPA process. Plus the National Party and Act have committed to repealing the bill if they are elected next year.