One of the most recent and significant changes in employment law has been the introduction of the Fair Pay Agreements Act 2022 (FPAA) which came into force on 1 December 2022.
The FPAA provides a platform for bargaining between employers and unions across entire industries or occupations for Fair Pay Agreements (FPAs). Once agreed, FPAs would mandate minimum terms of employment applicable to all those in a given industry or occupation.
FPA bargaining is to be undertaken by unions and employer associations. Once negotiations have concluded, the FPA must be ratified by employers and employees. Once ratified, the terms of the FPA apply to all participants in that industry (employees and employers alike) regardless of their level of participation in the FPA bargaining. FPAs also apply for longer terms than collective agreements as they are expected to last between three and five years.
The process
Before discussing the FPA bargaining process, it is important to address some of the overarching obligations which need to be adhered to in bargaining. These include:
- Representation of Māori: each bargaining side must use its best endeavours to ensure Māori employees and employers are represented in the process. This includes getting feedback from Māori and considering whether each bargaining side should include a person who represents the interests of Māori.
- Duty to act in good faith towards each other: parties are expected to maintain productive relationships. They are expected to be responsive and communicative and should not mislead or deceive the other either directly or indirectly. Parties to the bargaining on the same side also owe a duty of good faith to each other.
- Standard compulsory terms: an FPA must include certain mandatory terms, including setting out what work is covered by the FPA, standard hours, minimum pay rates, training and development, leave and the duration of the FPA.
Initiation
An FPA bargaining process is initiated by a union when it has satisfied one of the two initiation tests and then applies to the Chief Executive of the Ministry for Business, Innovation and Employment (MBIE). There are two tests:
- The representation test: if the union can demonstrate that initiation is supported by 1,000 employees who would be covered by the proposed FPA or at least 10% of all employees who would be covered by the proposed FPA.
- The public interest test: where MBIE is satisfied that employees of a particular industry are receiving low pay and have little bargaining power at work or have a lack- of-pay profession or long or unsocial hours or contractual uncertainty.
As part of the first step, it is the union’s responsibility to ensure that coverage of the FPA (ie, the type of work the agreement applies to) is described in adequate detail so employers and employees can determine whether they are captured by the FPA process.
Formation of bargaining sides
Once MBIE approves the union’s application, a notice must be issued within five working days, notifying that bargaining has been initiated.
An employer has the obligation to identify its employees covered by the FPA and notify any unions with covered members who are employed by the employer that an FPA process has been initiated.
An employer also must (within 30 working days) provide employees with written formal statements addressing the provision of the employees’ contact details to the initiating union. The employer must allow 20 working days for employees to advise that they do not want their contact details to be given to the union.
The employer bargaining side could be an employer association or a specified state employer. An employer association must be legally formed as an incorporated society and must apply to MBIE for approval to join the bargaining. More than one employer association can form the employer bargaining side.
Both bargaining sides will need to agree an “inter-party side agreement” about the bargaining and appoint a lead advocate/ spokesperson.
Bargaining
The bargaining process will likely be similar to how standard enterprise bargaining for collective agreements occurs under the Employment Relations Act.
The parties must discuss the objectives of the proposed FPA, health and safety requirements, arrangements about flexible working and redundancy. Bargaining also includes consideration of and response to proposals made by the other side, providing requested information as well as responding to claims made.
Should a dispute arise during the bargaining process, the parties can use mediation services or bargaining support services to help resolve the issue.
Lockouts and strikes are not lawful during the FPA process in relation to FPA bargaining.
Finalising the FPA and ratification
Once the bargaining process has concluded, the agreed FPA must be submitted to the Employment Relations Authority for assessment with the minimum requirements of the FPA and other employment legislation.
The ERA also assesses whether the FPA overlaps in coverage with any other FPA. If there is such an overlap, the ERA will determine which agreement offers the better terms. It then requires the lesser FPA to be amended to remove the overlap so employees would be covered by the better terms.
Once the ERA has approved the agreement, the bargaining sides must arrange for a ratification vote. If the vote is in favour of ratification (both the covered employees and covered employers approve), then the agreement is verified by MBIE.
If, however, during the first ratification vote, the agreement is not ratified, the FPA parties are sent back to the bargaining table. If the re-negotiated FPA is not ratified the second time around, then either of the bargaining parties can apply to the ERA for it to fix the terms of the FPA.
FPA dashboard
After the enactment of the FPAA, MBIE launched an FPA dashboard with the latest information about proposed FPAs and how they are progressing. The dashboard provides information about the bargaining parties, links to public submissions, publications and any other relevant information, including decisions.
Current applications
There are six approved applications with one more (waterside workers) awaiting approval. The dashboard records that three other applications were made but withdrawn. The six current applications have been initiated by the following sectors:
- Hospitality industry: the coverage for this application is for all employees who provide services in accommodation, cafes, restaurants, takeaway food services, pubs, taverns, bars, clubs (hospitality), event catering companies, casino operations and motion picture exhibitions. This application was initiated via satisfaction of the representation test of 1,000 or more employees approving.
- Grocery supermarket industry: the coverage for this application is for those occupations engaged in retailing groceries, such as employees who fill up shelves, checkout operators, office cashiers, store people and butchers. This application was initiated via satisfaction of the representation test of 1,000 or more employees approving.
- Security officers and guards: the coverage applies to employees who patrol property, watch for irregularities (such as fire hazards, malfunctions or lights left on), issue security passes, monitor alarms, detect/investigate theft or maintain This application was initiated via the representation test.
- Commercial cleaners: coverage is proposed to apply to anyone who cleans offices, residential complexes, hospitals, schools, motels, industrial working areas, industrial machines, construction sites and any other commercial premises. The application was also initiated via satisfying the representation
- Early childhood education: the coverage applies to pre- primary school education. This application was initiated via satisfying the representation test.
- Inter-urban, rural, and urban bus transport: coverage includes occupations within the bus transport industry which involves mainly carrying passengers on public roads on a passenger service vehicle across inter-urban, rural and urban regular routes and regular schedules, including to and from schools. This application is the only one currently at the bargaining stage.
Conclusion
The FPAA is one of the largest changes in New Zealand employment law in recent decades. In potential impact, the legislation is similar in scope to the historic compulsory arbitration system created by the Industrial Conciliation and Arbitration Act 1894.
Under that system, the Arbitration Court could make binding decisions on awards which set down minimum pay rates and conditions for all employees in a specified industry.
It is still too early to comment reliably on the FPAA’s effectiveness, but it is clear that in its possible reach, the legislation has the potential to remake employment relations in New Zealand.
Simon Lapthorne is a partner at Kiely Thompson Caisley and a member of the ADLS Employment Law committee.
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