Fair Pay Agreement Act is now law; the biggest overhaul of employment law since the millennium
The Fair Pay Agreement Act came into force this week, on 1 November, creating what has been touted as the biggest overhaul of employment law since the millennium.
Fair Pay Agreements (FPAs) are industry wide agreements which will set the minimum terms and conditions of employment for particular employee groups (such as early childhood, aged-care or hospitality workers, or cleaners). The FPAs will set minimum terms such as hours of work, wages, overtime and penalty rates, superannuation contributions, and potentially other matters such as redundancy entitlements or flexible working arrangements. Once ratified, the relevant FPA will be applied nationally, and all employers in that industry will have to abide by its terms, whether or not they were involved in the bargaining process.
How will Fair Pay Agreements be created?
The process to start creating an FPA can be initiated by employees (through the relevant union), or MBIE, if it considers it is in the public interest. The threshold for employees is 10% of all employees in a given sector in favour of an FPA, or just 1,000 employees if the 10% number is too high.
Once the union has initiated the bargaining process for a particular group of employees (defined by occupation or by industry), both unions and employers will appoint representatives to go to the bargaining table. The parties can use mediation (through MBIE’s mediation service) and facilitation (through the Employment Relations Authority) to assist with any difficulties. If the parties cannot reach agreement, the Employment Relations Authority can set the terms and conditions of the FPA. The final agreement is then subject to a ratification process, in which 50%+1 of both employees and employers must vote yes.
We, and others, have previously raised concerns around the FPA framework. Despite its good intentions, the Act brings with it a fair amount of collateral damage.
The two issues we will raise here is that firstly, there is a real risk that the voices of small businesses could be drowned out during the bargaining process. Voting power under the FPA system is primarily allocated on the number of employees a business has. This means a small business will have significantly less say on the terms of the FPA than a big corporate, but will nonetheless be bound by the terms (even if they had no idea an FPA was being bargained for).
Secondly, there is little scope for regional variations in the terms set in an FPA. This means a Rawene dairy owner will be bound to pay the same minimum wages as a large conglomerate like Countdown is paying staff in Ponsonby.
One of the FPA Act’s stated aims when it was announced was to increase New Zealand’s productivity. It is not clear how pushing increased costs and compliance onto small to medium businesses that are already struggling, for arguable benefit, will do this.
How can we help?
If you need assistance reviewing your employment agreements, advice about health and safety risk assessments or any other employment matter, our experienced specialist employment law team will be happy to help. You can view our Employment Law team here.
WRMK Lawyers takes all reasonable care to make sure that the information in this article is up-to-date and accurate at today’s date. It is necessarily general information and not intended as legal advice to be relied upon.
Our thanks to Kezia Purdie for writing this article.
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