Fair Pay Agreements: Bargaining process begins after passing of controversial legislation

The new bargaining system established through the Government's Fair Pay Agreement (FPA) legislation comes into effect on Thursday.

The legislation was controversial while moving through Parliament. The Government said it will lift wages, improve employment conditions, and create a more productive economy, but National has promised to repeal it, arguing FPAs allow a "tiny fraction" of a sector to "dictate terms for the majority". 

Regardless, with Labour having a majority in the House as well as support from the Greens and Te Pati Maori, the legislation passed and was given the royal assent in early November.

Now, the system is ready to go and applications to initiate bargaining are able to be made. Hospitality workers, bus drivers and supermarkets workers are all set to start the process.

So here's how it works:

What is a FPA and who is involved?

A Fair Pay Agreement outlines the minimum employment terms for all covered employees within an industry or sector. 

Under the legislation, the agreement must outline what work is covered, minimum pay rates, terms around training and development, how much leave employees are able to take, and how long the agreement will last.

The FPA system brings unions and employer associations together to bargain for what those minimum terms should be. 

Unions which are approved to be the employee bargaining party bargain on behalf of all workers covered by the proposed FPA, not just the members of the union. It's a similar deal for employer associations bargaining for all employers. 

The conditions outlined in the FPA are just a minimum. Employers and employees could still agree individually to better terms. 

The bargaining process

The FPA process begins when a union applies to MBIE for approval to begin bargaining. However, this union - called the initiating union - needs evidence to demonstrate it is an eligible union and meets either a representation or public interest test.

The representation test means showing 10 percent or 1000 workers who would be covered by the FPA support the application. 

The public interest test means showing that employees who would be covered by the FPA currently receive low pay and have little bargaining power, have a lack of pay progression, or are not paid enough when doing long hours, night shifts, or weekends. 

MBIE may invite public submissions for between 20 and 30 days to confirm these tests have been met. 

If the application is approved, an eligible employer association can then apply to become an employer bargaining party. They also need to prove they are an eligible employer association.

Other unions and employer associations can join each side once the bargaining has been initiated.

Employers must allow those employees that would be covered by the FPA to attend two paid FPA meetings if they occur during work time. The meetings are organised by the union. Employers must also provide information about the FPAs to employees. 

When both sides have come to an agreement, the covered employees and employers then vote on whether to agree to the terms. If the majority agrees, the Ministry of Business Innovation and Employment (MBIE) will confirm it and finalise the agreement in law.

If the two sides can't agree or if employees and employers reject a deal twice, the bargaining side can apply to the Employers Relations Authority (ERA) to make a decision.

Ahead of the FPA system beginning on Thursday, BusinessNZ said it is available to provide resources to help employers who may face bargaining. 

"We will offer our own legal and other resources to help employers who get caught up in a Fair Pay claim," said BusinessNZ advocacy director Catherine Beard.

"We are aware that the scales are massively stacked against small businesses, and they will need all the help they can get if a union comes knocking on their door to set up a Fair Pay agreement."

Beard said BusinessNZ has rejected the Government's offer for it to be a default bargaining party. This is the default employer bargaining party if no other employer association comes forward to engage with bargaining from the union.

If the default bargaining party doesn't engage, the initiating union can apply to the ERA to set the FPA terms. 

Employers and Manufacturers' Association (EMA) chief executive Brett O'Riely supported BusinessNZ providing resources. 

"The BusinessNZ Network's members employ 65-70 per cent of the country's workforce so we feel we must add our significant resources to help employers who will be affected by this legislation. We have experienced legal and consulting teams who will provide their considerable expertise in centralised bargaining to our members in dealing with FPAs," he said.

"Also, with the Employment Relations Authority (ERA) having the power to set the terms of an FPA if no employer is available, we feel we need to step back into this mess. The ERA consistently finds in favour of employees in more than 70 per cent of hearings, so employers will have little faith in the ERA bargaining also from their corner."

New Zealand Council of Trade Unions (NZCTU) President Richard Wagstaff said hospitality workers, bus drivers and supermarket workers will be the first industries to use the new process.

He called it a historic moment for working people. 

"FPAs represent a new beginning for working people, and the restoration of their rights," he said. "FPAs will help lift conditions for workers across entire industries."

A statement from the NZCTU also provided messages from workers in those three industries.

They said the agreements will mean improvements to their working conditions, including fairer wages and better health and safety training.