Living wage vote ‘creates legal risk’

WELLINGTON City Council has been warned its living wage policy for contractors may open it up to legal risk, adding $2.4 million to the cost of a security contract with ‘‘little . . . tangible benefits’’.

On October 28 the council will discuss the regional security services contract, under which a group of local authorities are jointly tendering for security, noise control and cash collection services.

None of the other councils taking part in the contract have suggested requiring contractors pay their employees a living wage, but councillors in Wellington will decide whether to direct the contractor to do so for work conducted within its boundaries.

If it were to direct the contractor to pay the living wage it would cost Wellington City an extra $2.4m or 19 per cent over the seven years of the contract.

Council staff are advising councillors vote not to approve the payments, warning they ‘‘cannot be justified in terms of improved quality and/or effectiveness’’.

In 2013 Wellington City became the first council in New Zealand to require its staff be paid a living wage, giving an immediate pay increase to about 450 staff.

It voted to extend the policy to contractors in June, although in each case councillors must vote to instruct staff to implement the policy. This places the legal responsibility for each decision on the council, rather than staff.

Wednesday’s vote is the first time the council will face such a decision.

Councillors have been told by staff that voting to pay the living wage in this case could create a precedent for other contracts, as well as creating legal risk.

According to the council it had been advised by its lawyers that requiring living wage payments for services to the council ‘‘in the face of limited evidence of increased quality or effectiveness, would give rise to a real public law risk that the council’s decision could be challenged by way of judicial review’’.

The advice added ‘‘the council is at risk of being found to have acted outside of the purpose of local government’’ under the terms of the Local Government Act.

The Wellington Chamber of Commerce, which has long opposed the council’s stance on the living wage said the organisation should heed its own legal advice.

‘‘They surely cannot ignore what their own lawyers are telling them. That would be very irresponsible,’’ chief executive John Milford said.

Councillor Nicola Young said the legal advice should raise alarm bells: ‘‘The big concern with this is it opens us up to legal challenge, and the council needs to focus on its core role, delivering services and providing value for money.’’

Deputy Mayor Justin Lester said the council had previously been given legal advice that the living wage for contractors was a breach of the Local Government Act, while Living Wage Aotearoa had provided legal advice saying the opposite.

Establishing the benefits of any spending outside of core services was a judgment, Lester said.

‘‘How do you judge anything? We’re putting $3 million into a technology hub because we think it will stimulate economic development, but we don’t know.’’

When the council switched its parking wardens from contractors to employees the city had noticed an improvement in service, with the wardens acting more as ‘‘ambassadors’’, Lester said.

Lyndy McIntyre, Living Wage Aotearoa’s Wellington coordinator said its legal advice from public law expert Matthew Palmer said the opposite to that of the council.