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The Fair Pay Agreements Bill - What to Expect

The Fair Pay Agreements Bill - What to Expect

On 29 March 2022, Parliament introduced the Fair Pay Agreement Bill ("the Bill") coined to the "biggest shakeup to workplaces in generation coming from government". The Bill has recently passed its first reading. Despite this, a number of people have expressed their reservations with the newly proposed system such as National Party's Paul Goldsmith stating that the Bill may make New Zealand less internationally competitive and add pressure to already stressed businesses.

The Bill establishes a process where employers and employees can bargain for minimum terms and conditions in particular industries or occupation groups. Employers and employees will be represented by bargaining parties – employees represented by unions and employers represented by qualified representatives or the relevant industry body. The aim of this process is to allow for effective bargaining for pay and better working conditions.

So, how will the process look in practice?

To initiate this process, the union must submit an application to the Chief Executive of the Ministry for Business, Innovation and Employment ("MBIE"). The application must either:

• meet the threshold of support by either at least 1000 employees or 10% of all employees in the industry or occupation, or

• meet the public interest test.  To meet the public interest test, the unions must show that the employees in question receive low pay for their work; have little bargaining power in their employment; or poor pay progression.  

If the union is successful, it must notify all employers and employees who are proposed to be covered by the fair pay agreement ("Agreement"), and bargaining commences.

To assist during bargaining, the parties can use the MBIE mediation services or an independent mediator. The Bill provides guidance for the bargaining process such as setting out the process for each bargaining party and any changes to scope during bargaining.

Support

Both bargaining parties may receive government provided training with the government vowing to contribute up to $50,000.00 per bargaining side. This sum has been calculated on the basis of Agreements being bargained per year. If more are to occur, this amount will be less.

Successful Bargaining

If bargaining is successful, an Agreement will need to be drafted in accordance with the Bill's requirements and must specify: the start date and expiry date of the agreement; the group covered by the agreement; hours of work; wages; and the process for amending the agreement. Employers and employees are able to bargain other matters in addition to the minimums provided for in the Bill.  

Once an Agreement is arrived at, before the Agreement can be enforced, the Authority must assess its compliance with the Bill and New Zealand employment law. Once the terms of the Agreement have been given the 'all clear', the Agreement is then ratified through a majority vote. Each employee covered is entitled to one vote with the number of employer's votes depending on the number of employees they employ.

Unsuccessful Bargaining

If bargaining is not successful, the parties can apply for mediation or to the Employment Relations Authority ("Authority") for a recommendation. If, after this, an Agreement is still not arrived at, the Authority can determine what the terms of the Agreement will be.  

The Agreement

Once ratified, the details of the Agreement will then be considered minimum entitlements and can be enforced through the standard employment dispute resolution process or by a Labour Inspector. All employees and employers encompassed within the group covered are subject to the Agreement regardless of whether they were involved in the bargaining or voted in favour of its terms and conditions. The Agreement may vary depending on the location of employees in differing regions.

What are the Next Steps?

The Bill will go through the full parliamentary process. The public have an opportunity to comment and can do so until 19 May 2022. Submissions can be made here:

Fair Pay Agreement Bill Submission Document  


New Public Holiday – Review of Employment Agreements

As an aside – the Government recently announced a public holiday to celebrate Matariki that recognises Te Ao Māori. The date will shift each year to align with the Māori lunar calendar and will always be on a Friday.

This year the public holiday will be on Friday 24 June 2022. For employers this is a standard public holiday.

With the addition of a new public holiday, if you haven't had your employment agreements reviewed and updated for a while, now is the time. We can review your agreements and agree a fixed fee up-front.

If you have questions or would like your employment agreements reviewed please contact:

Melissa Johnston (Partner) on (09) 306 6729 (mjohnston@mcveaghfleming.co.nz)

See our Expertise page

Employment Law

Written by Melissa Johnston and Olivia Faulds

© McVeagh Fleming 2022

This article is published for general information purposes only.  Legal content in this article is necessarily of a general nature and should not be relied upon as legal advice.  If you require specific legal advice in respect of any legal issue, you should always engage a lawyer to provide that advice.

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