The Fair Pay Agreements Bill was introduced to Parliament yesterday, and can be accessed here. 

We consider this Bill goes far further than employers would ever have contemplated. Rather than amending the Employment Relations Act 2000, the Bill proposes an entirely new Act with 244 sections. The Minister foreshadowed this during our recent client webinar when he said the Bill could bring about the biggest change to workplace laws since the Employment Contracts Act was introduced. 

We will be making submissions on the Bill and we encourage employers to do so as well or to contact us.

Some of the key elements of the Bill include:

• The Bill allows any eligible union to initiate bargaining for a Fair Pay Agreement (FPA) if it meets either a representation test of at least 1,000 employees or 10% of the employees in proposed coverage, or a public interest test based on specified criteria such as low pay, little bargaining power, or lack of pay progression. The Chief Executive of MBIE must approve such initiation (and may invite public submissions when deciding whether to approve an application to initiate bargaining).

• Under the Bill, bargaining will take place between bargaining parties representing employees and employers. Employee bargaining parties will be eligible unions. Employer bargaining parties will be eligible employer associations (approved by the Chief Executive of MBIE), and could also include certain specified public sector employers who are allowed to participate directly in bargaining. If one side is unrepresented (or becomes unrepresented during bargaining), default parties will step into bargaining. The Bill provides for these default parties to be specified in separate regulations, stating that those regulations must specify an employer default bargaining party that represents employers and is the most representative organisation of employers in New Zealand. Once specified, that organisation will be legally required to act as the employer bargaining party in circumstances where a default party is needed.

• The Bill sets out a general obligation of good faith, which is based on similar obligations in the Employment Relations Act 2000. It outlines specific good faith obligations between parties within the same bargaining side (for example, between 2 bargaining parties), and also between the employee bargaining side and the employer bargaining side.

• The Bill sets out what must, or may, be contained in a fair pay agreement. Each FPA must specify when it comes into force and when it expires, its coverage (with sufficient clarity), the normal hours of work, minimum base wage rates (including when and how they are adjusted), overtime, penalty rates, any superannuation, the governance arrangements that will apply to the bargaining sides, and the process for each bargaining side to engage with the other bargaining side, if they are bargaining to vary the agreement. The Bill also sets out several other topics that bargaining parties must discuss whether to include in a fair pay agreement, for example, health and safety requirements or leave entitlements.

• The Bill provides for a dispute resolution process based on the Employment Relations Act 2000. Parties may access mediation and support services under the Bill. If parties cannot resolve their dispute using those services, a bargaining party may apply to the Employment Relations Authority for a determination. In addition, if parties cannot reach agreement during bargaining and specified criteria are met (for example, exhausting all other reasonable alternatives) or if ratification of a fair pay agreement has failed twice, a bargaining side may apply to the Authority to fix the terms of the FPA through a determination.

• To finalise an FPA, it must be submitted to the Authority for a ‘compliance assessment’. Once approved by the Authority, the agreement must be ratified (following a ratification vote by covered employees and employers). If both bargaining sides vote in favour of ratification, the FPA must be verified by the Chief Executive of MBIE (if satisfied that the specified requirements for an FPA have been met). The Chief Executive may then validate the terms of the FPA through secondary legislation. A finalised FPA will then apply to all employers within coverage.

There will be an opportunity to provide submissions on the Bill during Select Committee stage. Please contact a member of our team if you have any questions at this time or if you would like help preparing submissions.