Fair Pay Agreements - Coming to a place near you very soon ...............

14 October 2022

The Select Committee has reported back on the Bill, with very few changes proposed.  The Bill has its Second Reading on 18 October and if passed most of the Bill would come into force one month after Royal Assent.  At the current rate of progress, the Bill is expected to be passed before the end of the year, with the first FPA being in place in the first half of 2023. 

The process remains cumbersome, as earlier reported here

The key changes proposed by the Select Committee are as follows:

1.    Backstop Policy:

Because Business NZ withdrew from participation in the process and refused to be the default employer bargaining party, the Minister proposed a 'backstop policy'.  What this means is that once bargaining for an FPA is initiated, unless a relevant industry association steps in to become the employer bargaining party, the matter will be referred to the Authority to determine what the terms and conditions of the FPA should be, without any employer input.  That also raises questions about whether the Authority has the necessary resources in terms of expertise to undertake the work and in sufficient numbers to handle the likely volume. The key points arising are:

  • If no party is willing to represent the employer side, the Authority can decide on the terms and conditions of the proposed FPA.

  • The Authority must decide the terms and conditions of a proposed FPA if the chief executive of MBIE notifies a union side that it may apply to the Authority to do so, and an application is made within 3 months. 
  • If an employer side is formed after a union side receives notice that it could apply for a determination from the Authority, but the application has not yet been made, then bargaining must resume.
  • If a union side has been notified that it could apply to the Authority for a determination on an industry-based FPA, and a second FPA is initiated in the same industry, then the FPAs must be consolidated and bargained together; and the application for a determination from the Authority for the first FPA must cease. 
  • In determining an FPA, the Authority may only fix those terms that are specified as mandatory to include, or mandatory to discuss.
  • The Authority can consolidate two proposed FPAs if they are from the same industry and both were set for determination under the backstop policy.

 2.   Representation Test:

  • As introduced, the Bill would allow a highly paid industry or occupation to initiate an FPA under the public interest test. Now the public interest test will require employees within the coverage of the proposed FPA to be low paid, and meet one of the other three criteria being, low bargaining power, a lack of pay progression, or inadequate pay, taking into account factors such as contractual uncertainty or long or unsocial working hours. 
  • However, a highly paid group could still initiate bargaining for an FPA if they can satisfy the representation test – ie 1,000 employees or 10% of all employees proposed to be covered.
  • As introduced, the Bill could be taken to mean that all employees who would be covered by a proposed FPA must meet the criteria of the public interest test, which was not the intent.  An amendment is proposed to enable regulations to specify the portion of covered employees required to meet the criteria of the public interest test.

 3.   Coverage:

  • An FPA could cover an occupation (for example, all commercial cleaners) or an industry (for example, all employees in the supermarket and grocery industry). The Bill as proposed would require the coverage of a proposed FPA to be defined with sufficient clarity so that all employees and employers are able to determine whether they would be covered. An amendment is proposed to enable the coverage of an FPA to be defined by regulation.
  • It may be the case that an existing FPA covers everyone a proposed FPA would cover, and more.  As such, the two FPAs would not have exactly the same coverage.  The Select Committe recommends that bargaining can’t be initiated for another FPA if the proposed FPA would only cover work that is already covered by the existing FPA.
  • The Chief Executive of MBIE may not determine whether there is an overlap between a proposed FPA and an existing FPA.  They may only check to see whether there may be an overlap. If there appears to be an overlap, MBIE would advise the bargaining sides to resubmit the proposed FPA to the Authority for determination.
  • An FPA may only cover part of an employee’s work, in which case:
    • Where at least 25% of an employee’s work is covered by an FPA, that employee is covered by the FPA.
    • If two or more FPAs meet this 25% threshold, the FPA that covers the largest portion of the employee’s work would apply.

4.    Good Faith:

  • If the parties are deadlocked on a particular issue, they are still obliged to continue bargaining on other matters.
  • The Authority can determine an FPA if one bargaining side is not engaging and has breached the duty of good faith and the breach was either deliberate, serious and sustained, or involved behaviour that undermined the process.

 5.   Content:

  • Arrangements relating to training and development and leave entitlements must now be specified in FPAs, as opposed to just being discussed in bargaining.
  • It is no longer mandatory to specify in FPAs “whether the minimum base wage rates include or exclude the employer’s contribution for superannuation (if any)” to make clear that compulsory employer contributions to KiwiSaver can’t be deducted from an FPA minimum base rate.

 6.   Ratification:

  • An employee may vote if, at the time of voting, they consider they would be covered by the proposed agreement.
  • An employer may vote if, at the time of voting, the employer considers that they have at least one employee who would be covered by the proposed agreement.

 7.   Timing:

        There has been some minor tinkering with time frames, concerning:

  •  When MBIE must respond to notices of initiation and notify affected employers and unions,
  •  When employers must provide employee contact details
  •  When bargaining parties must provide updates about the bargaining to other participants in the bargaining side.
  •  When ratification outcomes must be advised.

For more information: Tony Teesdale – 021 920 323, Justine O’Connell 021 920 410 or Michelle Battersby 021 993 735