Fair Pay system announced

‘‘This is against international law, which says collective agreements should always be negotiated voluntarily.’’

Kirk Hope

BusinessNZ chief executive

The Government has announced a radical overhaul of New Zealand’s labour laws, with a policy package that will supercharge the institutional power of unions and place centralised wage bargaining back at the heart of industrial relations law.

The new Fair Pay Agreement system, announced in Auckland yesterday, is explicitly designed to put a floor under wages by allowing unions to negotiate on an industry-wide basis. If 10 per cent of a workforce, or 1000 workers agree, a new Fair Pay Agreement (FPA) can be enacted.

The relevant union will then have power to negotiate directly with an employer group covering the sector that will be compelled to negotiate to create the agreement. Any resulting agreement will set minimum ordinary time wages and conditions, overtime, penalty rates across the country. Regional variations to account for cost of living will be able to be built into the system along with some limited exemptions and strikes will be prohibited during negotiations. The agreements will cover all workers – union and non-union.

The Government argues that such a scheme is necessary to stop a ‘‘cowboy effect’’ where employers who treat employees badly undercut their competitors on price and force wages down.

It is also concerned that wage increases have not kept pace with increases in productivity in some sectors.

Both the New Zealand Council of Trade Unions and BusinessNZ will receive $250,000 for the next three years to ‘‘support their role in co-ordinating FPAs, identifying bargaining parties and helping to raise awareness about FPAs and the bargaining process’’, Minister for Workplace Relations and Safety Michael Wood said.

Sectoral unions can also receive $50,000 to help with the costs of bargaining.

But BusinessNZ, the peak business sector body, is not happy with the deal.

‘‘Any pay deals reached wouldn’t be fair because the process is essentially compulsory – employers would be required to agree to what unions wanted, with compulsory arbitration if they didn’t,’’ BusinessNZ chief executive Kirk Hope said.

‘‘This is against international law, which says collective agreements should always be negotiated voluntarily.’’

One of the goals of the new regime is to increase the bargaining power for employees.

Because of their new position as bargaining agents for workers across entire industries, the changes will increase the institutional importance of unions.

Under the new system, which is expected to be legislated by the end of the year, unions can initiate a FPA if 1000 workers or 10 per cent of the workforce in an industry support the change.

There will also be a route to initiate an agreement via a ‘‘public interest test’’ in industries or occupations where ‘‘employment issues exist, such as low pay or limited bargaining power’’.

Once an agreement is initiated a bargaining process will commence.

If a deal is agreed on, the proposed FPA will be vetted and voted on by employers and employees covered by the new deal. If it gains more than 50 per cent support on both sides, a new FPA will be in place.

If the parties can’t agree during initial bargaining there will be a dispute resolution process and further bargaining will occur. If the parties still cannot agree the Employment Relations Authority will make a ruling on the terms and both parties will be bound by it.

Similarly, if a deal is agreed by the bargaining parties – the relevant union and employer associations – but then fails twice to be ratified by 50 per cent of unions and employers, it will also pass to the Employment Relations Authority for a ruling.