Fair Pay Agreements Bill to take effect very soon
The widely disputed Fair Pay Agreements Bill (“FPA Bill”) has been passed and will take effect on 1 December 2022. When it takes effect, the Act will provide a framework for collective bargaining for fair pay agreements (“FPA’s”) across all New Zealand industries or occupations, rather than just between unions and particular employers.
Background:
Consultation surrounding the FPA Bill had been ongoing for years and the passing of the FPA Bill represents a fundamental shift in employment relations in New Zealand. The Bill ultimately creates a framework within which FPAs can be bargained for. The FPA Bill’s objective is to improve labour market outcomes in New Zealand by enabling employers and employees to collectively bargain industry-wide or occupation-wide to achieve minimum employment terms.
FPA bargaining takes place between representatives for employees and representatives for employers. Eligible/approved unions will bargain on the employee bargaining side and eligible/approved employer associations (including industry associations) will bargain on the employer bargaining side.
FPAs will enable workers and their representative unions to negotiate minimum terms and conditions applicable to an entire industry. Employees and their employer will be covered by a proposed FPA if their type of work is part of the occupation or industry the proposed FPA would cover. FPAs will overrule individual employment agreements if the FPA is considered more beneficial for the employee.
An FPA must include:
- commencement and expiry dates (between 3 to 5 years);
- training and development;
- how much leave an employee can have;
- wages (base rates, superannuation, overtime, penalty rates; and
- the process for variation.
They could also cover other conditions such as redundancy.
The bargaining parties also need to discuss the objectives of the FPA, health and safety requirements, flexible working and leave entitlements. The proposed system is very similar to Australia’s awards system.
In order for an FPA to be valid, the Chief Executive of MBIE must give the tick that one of the following relevant tests has been met:
- Representation test - Either 10% of the total occupation or industry or at least 1000 employees in that occupation or industry support initiating bargaining for the proposed FPA; or
- Public interest test - The employees in question receive low pay, have little bargaining power, or have a lack of pay progression in their employment.
The Chief Executive can also call for public submissions in deciding so. If the test is satisfied, MBIE must issue a public notification within five days.
The FPA Bill is expected to bring about one of the biggest changes to workplace laws in New Zealand in 30 years. Employers can take comfort knowing that strikes and other industrial action will not be permitted during the bargaining process.
The introduction of the FPA Bill may be quite confronting for many small businesses, particularly when having unions visit their business seeking access to their workplace and workers for the first time. Undoubtedly, the new FPA system will provide the union movement with significant power and employers will have to comply with an FPA even if the employer and their employees weren’t involved in the bargaining process.
As with all changes to legislation and employment relations framework, it will take time for society to adjust to and understand the extent to which the FPA system will affect the employment landscape.
If you require advice or have any concerns about the looming FPA system, please get in touch with a member of our employment team:
Jaesen Sumner (Jaesen@fsl.nz), Partner
Caylee Wood (caylee@fsl.nz), Lawyer