Cheat sheet: Fair Pay Act passed by Parliament

Thursday, 20 October 2022

Workplace Relations Minister Michael Wood and National Party MP Scott Simpson clash over the Fair Pay Bill.

This story was first published on Thursday and has been updated and republished in the wake of the passage of the Fair Pay Act on Wednesday.

Employers have failed to derail Fair Pay Agreements, with the law change paving the way for the big shake-up in labour rights passing its third and final reading on Wednesday.

Supporters argue the agreements will level the playing field between employers and workers and improve pay and conditions for many.

Opponents fear will they will hamstring businesses and send the country back to the 1970s.

Either way, it is now clear there will be no U-turn, with the regime for establishing Fair Pay Agreements set to come into effect in December.

* What would a fair pay agreement look like for hospitality workers?

* Addressing the glaring bargaining gap in the Fair Pay Agreements Bill

National Party workplace relations spokesperson Paul Goldsmith says it's wrong 'a tiny minority of workers' will be able to force FPAs on businesses.

What will Fair Pay Agreements be?

They will be agreements between workers and employers in an industry or occupation.

At a minimum, they will need to set out minimum pay, overtime and penalty rates, leave entitlements, and access to training and development opportunities for the workers they cover.

The minimum entitlements that are related to pay will only be allowed to vary depending on where in the country people worked and what their job and seniority level was, and nothing else.

In some cases, the minimum entitlements set out in a Fair Pay Agreement might just be the same minimums that workers are entitled to now under existing employment laws.

But the general expectation is they will provide some extra entitlements.

The agreements will last between three and five years, after which they will need to be renegotiated. But they should include an agreed process for amending terms, such as minimum pay, while they are in place.

Council of Trade Unions general secretary Richard Wagstaff has suggested that bus drivers, security officers, supermarket workers, cleaners, workers in early childhood education, and the forestry industry could be among the first to be covered by the agreements.

One concern about Fair Pay Agreements is that their terms are likely to be mainly negotiated by, and may favour, big businesses.

What if I want to negotiate my own pay and conditions with my employer?

If that is what you and your employer want, then Fair Pay Agreements won’t affect you.

Labour MP Marja Lubeck says Wellington's bus service shows why Fair Pay Agreements are needed.

The agreements are not designed to outlaw or get in the way of individual employment contracts or normal collective bargaining between unions and employers.

Rather, they would just set a floor on pay and conditions that employers couldn’t go below.

Will I definitely be covered by a Fair Pay Agreement?

Not necessarily, as it will depend on whether an agreement is negotiated or imposed on the industry or occupation you work in.

Workplace Relations Minister Michael Wood doubts Fair Pay Agreements will end up affecting most workers.

But that’s a guess, as the number and coverage of agreements would not be within the Government’s control.

ACT Party MP Chris Baillie says a Fair Pay Agreement isn't an agreement if it's imposed by the Employment Relations Authority.

If someone was covered by more than one agreement, for example they were a cleaner at a supermarket and there were separate ‘FPA’s for both supermarkets and cleaners, then they should be covered by whichever was the more generous deal.

Who decides if there will be a Fair Pay Agreement?

If 1000 workers in an industry or an occupation or 10% of their workforce (whichever is smaller) demand a Fair Payment Agreement, then employers will have to try to negotiate one with workers and their unions.

That means that quite a small number of workers in each industry or occupation will potentially make the decision of whether there needed to be an agreement, which is one of the bigger beefs that business groups have with the legislation.

The Employment Relations Authority can also require a Fair Pay Agreement if it judges workers in an industry or occupation have low pay and meet one of a number of other conditions, such as having to work anti-social hours or having little bargaining power.

BusinessNZ chief executive Kirk Hope fields questions from a select committee in June on the statements it has made about Fair Pay.

How will they be negotiated?

Unions and employers in each industry and occupation in which an agreement has been requested will try and hammer out the minimum terms and conditions they can mutually live with.

That will then go to a vote. If more than half of workers and more than half of employers’ votes (big employers will have more votes than smaller ones) are cast in favour, then that’s the deal.

And if they don’t reach an agreement?

If negotiations reach a stalemate or a deal is twice rejected by either workers or employers, then the Employment Relations Authority will step in and set the minimum terms and conditions itself.

There wouldn’t be a vote, so in theory the authority could impose a deal that the majority of workers and employers were unhappy with, if it though that fair.

This backstop is an important and controversial part of the law change.

Both employers and unions will face a dilemma when negotiating with one another; come to a compromise and agree terms and conditions they may not think are fair, or risk the Employment Relations Authority imposing something they like even less.

That may be an especially high-stakes game in the early days of the new regime, before either can see the track record of what authority-mandated agreements might look like.

How is it likely to work out in practice?

This becomes a matter of opinion and guesswork, and there are three obvious “unknowns”.

Each Fair Pay Agreement will involve a high degree of input from the Ministry of Business, Innovation and Employment (MBIE) and the Employment Relations Authority.

Among other things, MBIE will need to check applications for an FPA are within the rules and validate that the worker and employers’ representatives willing to negotiate them are the right ones to do that.

Even if the negotiations are successful and the Employment Relations Authority doesn’t need to step in and set the terms itself, it and MBIE will still need to approve each agreement and bring it into force through regulations.

MBIE has received additional funding on the assumption it will be doing the honours on six Fair Pay Agreements each year, but is an open question whether that will be enough to keep up with demand or whether there may be regulatory bottlenecks.

Another huge unknown is how willing the Employment Relations Authority will be to set minimum pay for junior workers in an occupation or industry above the current minimum wage – in situations where negotiations break down and it has to step in – and the justifications it might give for doing that.

One possibility is that the main and perhaps only practical effect of Fair Pay Agreements could be to guarantee compensation above the minimum wage for workers who don’t work a standard “9 to 5”, and some base level of pay progression for those who start to climb the employment ladder.

But until negotiations on a Fair Pay Agreement broke down and the authority was forced to show its spots, it’s hard to tell.

The third uncertainty is political.

The National Party has promised to repeal the legislation paving the way for Fair Pay Agreements as soon as it could if it wins next year’s election, so if that happened it would be game over.