The coalition agreement between the New Zealand Labour Party and New Zealand First describes the parties' intention of providing a "transformational" government with a key focus on sustainable economic development, higher wages, a healthy environment and reducing poverty and inequality. This article provides a summary of the key policies that will have an impact on New Zealand's employment laws and framework.
Fair Pay Agreements
The most significant proposed change is the introduction of Fair Pay Agreements (FPAs). FPAs are in effect large collective agreements negotiated between employers and unions in a particular industry with the assistance of the Employment Relations Authority. Negotiations for an FPA will commence once a sufficient number of employers or employees within a particular industry call for one. An FPA is intended to set the "fair, basic employment conditions" and will cover all employees and workplaces within the relevant industry. The detail and inner workings of how an FPA would be established and how it would operate is not yet clear. Labour has indicated it would need 12 months to discuss the proposal with businesses and unions. It is also not yet clear to which particular industries the FPAs will apply although the supermarket, hospitality, construction and transport industries are obvious contenders.
Labour has indicated the intention of the FPAs is to prevent the "race to the bottom" which it considers has been seen in some industries. This could however have a disproportionate impact on small to medium businesses as the employment conditions in an FPA will likely reflect the best industry standards. Although these standards may be economically viable for the larger employers, they may not be as suitable for smaller businesses.
The minimum wage (currently at NZ$15.75) will increase to NZ$16.50 within the first 100 days of the new Government. This will then progressively increase to NZ$20 per hour by 2020. The intention is for the minimum wage to eventually equal two-thirds of the average wage as economic conditions allow. Further, the incoming Government has said it would introduce a Living Wage for all workers in the core public service. The current rate calculated for 2017 to cover basic living costs is NZ$20.20 per hour. This is intended to set a good example for the wider public sector and private sector employers.
Unions and collective bargaining
Labour has indicated a commitment to strengthening the role of unions, particularly in relation to collective bargaining. The proposed changes include restoring unions' right to initiate bargaining in advance of employers, restoring the duty on parties who are in collective bargaining to reach an agreement (unless there is genuine reason not to), removing the ability for employers to deduct pay from workers taking partial strike action and removing the restrictions that prevent film and television workers from bargaining collectively.
A number of the proposed policies provide further enhancement of the minimum entitlements and protections afforded to employees. One of the most significant is the proposal to replace the 90 day trial period that was introduced in 2009. In addition to requiring reasons for dismissal, the new framework will involve a free referee service for disputes that arise during trial periods. The matter will be heard within three weeks of being lodged and the referee can make decisions to reinstate the employee or award damages up to a capped amount. Both parties can be represented but no lawyers will be allowed. One of the concerns of this new framework is that the referee service will be applying the same legal tests as set out in the Employment Relations Act 2000, although the parties do not appear to have recourse to the higher jurisdictions if they are dissatisfied with the outcome.
Further proposed changes designed to enhance protections for employees include increasing parental leave entitlement from 18 weeks to 26 weeks per year, the introduction of statutory redundancy compensation, re-introducing regulated rest and meal breaks and making reinstatement once again the primary remedy for personal grievances. Finally, and of interest to international companies, the Government has proposed making the New Zealand employment standards applicable to everyone working in New Zealand, including foreign workers working for foreign companies. This implies that certain New Zealand statutory provisions regarding employment standards will apply regardless of any foreign choice of law clause.
It is yet to be seen whether the proposed changes to the employment landscape will be "transformational" however the early indications are that the new Government is committed to strengthening minimum standards for workers and increasing the role and significance of unions going forward.
If you or your business has any questions regarding any of the issues raised in our article, please contact one of our team or your usual Bell Gully adviser.