Labour accused of being 'stuck in 1970s' as Business NZ calls for Fair Pay Agreements to be terminated

With Fair Pay Agreements (FPAs) coming into force in 2022, Labour has been accused by National of being "stuck in the 1970s", when a similar system was in place. 

FPAs are a set of terms and conditions - including wages and working hours - which employers in a particular sector will be forced to abide by, with the overall aim of raising workplace standards.

Labour's FPA plans were foiled by its former Government coalition partner New Zealand First. However with a huge majority in Parliament, Labour is now pushing ahead to improve pay and conditions for essential workers. 

But National's workplace relations spokesperson Scott Simpson fears the Labour Government is taking New Zealand back to an era of industrial action in the 1970s, when strikes were at an all-time high. 

"This is compulsory wage controls. It is unionism gone universal," Simpson says. "The National Party will repeal these recycled National Awards."

National Awards were based on the principle that basic terms and conditions were best established by the collective workforce. They laid out minimum wages and conditions across industries, with a Court of Arbitration settling disputes. 

Strikes were prohibited - as they will be under FPAs - though they often happened anyway, perhaps because arbitration, or settling disputes, was compulsory at the time. 

Pay Strike New Zealand
National fears the Labour Government is taking New Zealand back to an error of industrial unease during the 1970s, when strikes were at an all-time high. Photo credit: Getty Images

The National Awards system began to fall apart under the fourth Labour Government, which ended compulsory arbitration. It meant employers could refuse to settle disputes. 

Unions still had a place and industry bargaining still happened. But the Employment Contracts Act in 1991 dismantled the system and placed greater emphasis on mediation. There were far less strikes as a result.

Union density in New Zealand has since continued to decline, from about 42 percent of the workforce in 1991 to 17 percent in 2017. 

What will Labour do?

All employees will be covered by FPAs under Labour's scheme, even if they aren't part of a union. 

Any union will be able to initiate the FPA process as long as it can demonstrate support from either 10 percent or 1000 employees in the industry or occupation.

Simpson says it's another indication the Labour Government is "growing more interventionist by the day"

"This will see 90 percent of a workforce at the mercy of the other 10 percent and entire industries bound by agreements, whether they participate in the FPA bargaining process or not."

ACT leader David Seymour agrees. 

"You cannot take a relic of the 1970s, dust it off, and make it stick 50 years on. We will wipe it off the statute books sooner or later - and the way this Government is abusing its power, it is starting to look like sooner."

ACT leader David Seymour is opposed to Fair Pay Agreements.
ACT leader David Seymour is opposed to Fair Pay Agreements. Photo credit: Newshub / Zane Small

Retail NZ CEO Greg Harford says FPAs will add complexity. 

"Businesses have absorbed massive increases in wage costs over the past four years, and are braced for additional costs coming from the proposed increase in minimum sick leave requirements and the additional Matariki public holiday.

"Throwing additional costs into the mix will be unsustainable for many retail businesses."

But Workplace Relations and Safety Minister Michael Wood argues otherwise.  

"For too long New Zealanders working in critical roles like cleaners, supermarket workers, and bus drivers - whose work was essential to keep our country going during the pandemic - have been undervalued by our workplace relations system."

The Government will provide financial support to both Business NZ and the Council of Trade Unions to help them coordinate FPAs, as well as potentially providing a support person and direct financial assistance to bargaining parties. 

Business NZ CEO Kirk Hope is not a fan of the idea. He says the plan to implement FPAs should have been "terminated" when it was floated in 2019. 

"There would be nothing 'fair' about Fair Pay Agreements. Any pay deals reached wouldn't be fair because the process is essentially compulsory - employers would be required to agree to what unions wanted, with compulsory arbitration if they didn't."

Workplace Relations and Safety Minister Michael Wood argues Fair Pay Agreements will improve workplaces.
Workplace Relations and Safety Minister Michael Wood argues Fair Pay Agreements will improve workplaces. Photo credit: Newshub / Zane Small

The Public Service Association (PSA) says Labour's FPAs don't go far enough because contract workers won't be covered under the legislation. 

"It's important no door is left open for unscrupulous employers to undermine Fair Pay Agreements by engaging contractors on terms below those of employees," says PSA National Secretary Kerry Davies.

"If any employer misclassifies employees as contractors to avoid compliance, that employer should face penalties."

First Union, which oversees workers in finance, retail, transport and industrial workplaces, say FPAs couldn't come soon enough. 

"Because wages aren't bargained nationally, you end up with a situation where people do the exact same job in different parts of New Zealand for the same brand but are paid vastly different rates," says First Union secretary for retail and finance, Tali Williams. 

"Fair Pay Agreements will finally provide a pathway to end this kind of 'surface bargaining' and restore consistent incomes and wages rises for supermarket workers, regardless of where they live or who they work for."