Fair pay agreements herald a new dawn for employees – but what exactly are they?

The passage of the Fair Pay Agreements Bill yesterday afternoon could be one of the most significant changes in New Zealand’s industrial relations landscape in years. So what’s the point?

On Monday, many (but not all) New Zealanders enjoyed a day off on Labor Day. The public holiday was first observed on October 28, 1890 to commemorate the struggle for an eight-hour workday – a colossal win for workers at the time.

Fittingly, in a historic moment for workers’ rights in Aotearoa, the not uncontroversial Fair Wage Agreements Bill passed its third and final reading in Parliament, just two days after the holiday, by a vote of 76 to 43.

Since the bill’s introduction in March this year, the casually named FPA has found favor with unions that see potential to improve the working and living conditions of workers, while it has been mostly icy from employers’ organizations that believe it will create additional complexity is included, costs, disruption and reduced flexibility.

Ahead of the bill’s passage yesterday, Labor Relations and Safety Secretary Michael Wood paid tribute to the years of work of the late trade unionist Helen Kelly, who pushed for the Labor Party to adopt the directive. Wood later turned the focus to “those who clean, those who care, those who drive, those who serve, workers who have been left in the shadows of our deregulated labor market for thirty years”. Noting the collective gratitude to key workers over the last three years of the pandemic — cleaners, bus drivers, supermarket workers, nurses and teachers — Woods signaled the influence of that time on the drafting of the bill. “It’s time to recognize the work of these people,” he said. “We’ve come a step closer to the goal of making work fairer.”

When the wheels of fair pay arrangements really start to turn, we’ll likely be hearing a lot more about them. In fact, many of us will end up participating in the processes around us. So there’s never been a better time to brush up on the basics.

What is a Fair Pay Agreement?

In short, the aim is to create a ‘floor’ of minimum rights for workers in certain sectors. It could include wages, guaranteed breaks, vacation time, opportunities for a raise, safe working hours, procedures for dealing with bullying and sexual harassment, health and safety, resolution procedures, headcount, penalties, meal allowances and more.

Fair pay agreements bring employers and unions together within an industry to jointly negotiate minimum conditions for all workers in that industry or occupation. In practice, legislation will create legally binding documents, agreed by workers and employers, setting minimum wages and conditions for a sector.

Industrial Relations and Security Secretary Michael Wood. (Image: Included)

Seems to be a big shake!

It’s definitely a big shock, but at the same time it’s kind of not. We’ve had similar systems in the past. While negotiating your own individual contract has become a natural part of working in Aotearoa, this has not always been the case. Prior to the Labor Contracts Act 1991, New Zealand had a similar system of ‘national awards’ which gave base wages and conditions to entire industries, which was abolished in favor of today’s system where employees have individual contracts or collective bargaining agreements with a single employer. Over in Australia, a similar system of what they call “Industrial Awards” grants all wage earners in a given industry the same minimum wage rates and conditions.

Who will this cover?

In the future, a fair pay agreement could give you absolute security as an employee. There is a possibility that the majority of New Zealand workers will eventually be covered by an FPA. Although there is no ban on certain professions from creating a fair pay arrangement, the legislation is aimed at low-wage industries. “It’s these low-paying jobs that really need support and lack collective bargaining,” says CTU President Richard Wagstaff. “So I think the effect will be mostly for low-income people.”

What advantages could these fair pay agreements have?

The government sees the system as a necessary correction of 30 years without sector-based collective bargaining, which it says has negatively impacted productivity and helped widen inequality across the country shrinking share of the country’s earnings trickle down to the workers. In a press release earlier in the week, Wood said the legislation will help “stop the race to the bottom and ensure some of our lowest paid workers get a fairer deal.” This completes an important election commitment for 2020 and speaks to our focus on improving the lives of working people in New Zealand.” Addressing employers during the third reading, Deputy Prime Minister Grant Robertson said: “If you are a good employer, you are the good news, you won’t be dragged down by those trying to undercut you”.

In response to yesterday’s passage of the law, Wagstaff called it “the most significant industrial relations law in a generation.” Fair wage agreements, he said, will be particularly important for low-wage workers. They’re “a really important step, not just for workers in those industries, but for those industries as a whole, so they can rise up and be more attractive places to recruit and retain employees.”

A protest against the Employment Contracts Act in 1991 (Image: John Nicholson, Evening Post via the National Library)

So will everyone be happy about this?

Not at all. As mentioned above, workers’ groups and business organizations have harshly criticized campaigns against FPAs and even spent money on campaigns – until significant criticism. Both National and Act have made repealing the law a priority if they make it into government in next year’s election.

In a press release, National Party spokesman for workplace relations and security Paul Goldsmith said: “These misnamed agreements will reduce flexibility, choice and agility in our workplaces, precisely when we need to be agile in a competitive world .” In a separate Yesterdsy press release, ACT Small Business spokesman Chris Baillie said: “ACT has a simple message for unions concerned about Fair Pay agreements: do not bother yourself. Fair pay arrangements will be over before the ink dries.”

How will this work?

Once the FPAs receive royal assent (probably December 1st), it will take about five steps from start to finish. If you want to participate in the process, contact the union that covers your industry (tip: type “[type of job you do] union NZ” in Google) or the business association that covers your industry.

  1. Unions will start the process by collecting either 1000 signatures or 10% of workers in a sector (whichever is lower) to agree. Or the union must demonstrate that there is a significant public interest in initiating an FPA. Unions in various sectors have already begun collecting enough signatures and powers of attorney to get the wheels moving.
  2. All employers in a sector are informed that the FPA process has started. These employers will then ask their employees if they agree to sharing contact information with the unions leading the process. Unions will then contact those who agree to see what they would like to include in an FPA.
  3. Negotiations begin with the unions representing the workers and the representatives elected by the employers. The two sides will negotiate what should be included in the FPA, with some issues requiring mandatory agreement and others only requiring mandatory discussion. This is an obligation to ensure representation of Māori workers and employers.
  4. Once workers and employers reach an agreement, the entire industry will vote on it. The final fair pay agreement for a sector will require majority support from workers and employers, but will be limited to two rounds of negotiations. The terms agreed are independently checked by the Employment Relations Authority and MBIE to ensure that the terms are legal. If negotiations fail, the Industrial Relations Board will step in to decide the final terms.
  5. It is finally implemented through secondary law.
H&M workers protest outside the Commercial Bay store (Photo: Michael Andrew)

Do I have to join a union?

Although ACT’s Chris Baillie describes FPAs as “mandatory unionism” in a press release, the FPA Act emphasizes voluntary union membership – meaning workers do not have to be union members in the process. You can, however, join a union if you wish.

When is all this supposed to happen?

The fair pay agreement scheme is expected to begin shortly after the law is passed, likely in December. It is estimated that the process from negotiations to a final agreement on fair pay could take around a year.

So the law is passed, are there any obstacles to it now?

There are unknowns about how the system will keep up with the additional work that comes with the FPA process. The National Party and Act have committed to this repeal of the bill when they are elected next year.

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