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Fair Play in the Labour Market?

Today’s Fair Pay Agreement (“FPA”) announcement by the Government signals a significant change to New Zealand’s labour law landscape.

The proposed scheme, set to be introduced in 2022, would set minimum employment terms and conditions for all workers in an industry or occupation covered by the agreement.

A mainstay in Australian labour law for the past decade, FPAs will likely see the implementation of new models of bargaining to be adopted by a sector to sector level approach.

Under the Government’s current proposal, an FPA can be initiated if either:

  • A union can demonstrate support from either 1000 employees in the proposed industry or occupation or 10 per cent of the workforce; or
  • The public interest test shows employment issues, such as low pay, exist in an industry or occupation.

What is being proposed?

Under the proposed scheme, unions will represent employees while BusinessNZ will be the default representative for employers if there are no other suitable candidates. 

Certain features must be covered in all FPAs. These include:

  • base wage rates;
  • ordinary hours;
  • overtime; and
  • penal rates.

Other topics, such as redundancy, leave and health and safety, must be discussed but do not have to be agreed upon. The parties can agree to other employment terms.

The bargaining parties must use best endeavours to represent all those in coverage, including non-members, and to ensure Māori interests and views are effectively represented.

Once the bargaining parties reach an agreement, the FPA can be ratified via a majority vote of workers and employers. Employers are allocated one vote for each worker in coverage.

Financially struggling businesses can seek an exemption. FPAs can incorporate regional differences and other differential terms if they comply with statutory employment entitlement and the Human Rights legislation.

Bargaining parties will also have the opportunity to seek a contribution of up to $50,000 towards costs incurred during the bargaining process. They may be able to seek additional funds where low union or industry body membership makes coordination difficult. The parties can also seek the support of a bargaining support person during negotiations.

Once the terms of an FPA are agreed to, the Employment Relations Authority will conduct a review to ensure the terms are lawful. Only then will an FPA go to a ratification vote.

Once finalised, the Ministry of Business, Innovation, and Employment will make secondary legislation to bring the agreement into force. 

For and Against

By introducing FPAs, Workplace Relations and Safety Minister Michael Wood hopes to encourage investment in workforce training by “stopping the race to the bottom we’ve seen in various industries and encourage competition that isn’t based on low wages, but on better products, services, and innovation.”

Labour argues that FPAs will be a key tool to stop employers who invest in their employees being undercut by those who offer cheaper services through lower wage costs.  

However, there are opposing views as to the efficacy of FPAs. Business interest groups cite academic literature that suggests FPAs would harm productivity by reducing labour market flexibility. National has already indicated its intent to repeal any FPA legislation if they form a government.

If following reading this article you have any questions, please contact Melissa Borcoski or Vanessa Baakman of Saunders Robinson Brown who can assist with Employment Law related enquiries.

The above information is of a general nature only. The information in this article does in no way constitute legal advice and all readers should contact a law firm for advice relating to your specific circumstances.



Melissa Borcoski

About Melissa Borcoski

Melissa is head of our Litigation Team and specialises in commercial and civil litigation. She has specialist expertise in insurance law having acted for both insurers and policyholders throughout her career.

View all posts by Melissa Borcoski
Vanessa Baakman

About Vanessa Baakman

Vanessa is an Associate in our Litigation team and specialises in employment and family law.

View all posts by Vanessa Baakman
Ramses Hunt

About Ramses Hunt

Ramses is a member of our Litigation Team and assists with employment law matters and disputes.

View all posts by Ramses Hunt