Fair Pay Agreements Act – what employers need to think about now

The Fair Pay Agreements Act 2022 has now come into force, representing the biggest change to employment law in 20 years.

The first application has been made to the Ministry of Business, Innovation and Employment (MBIE) and is focused on the hospitality sector, covering employees at cafes, restaurants, takeaway food services (excluding catering), visitor accommodation (hotels and motels), casino operations, and cinemas.

In short, a fair pay agreement (FPA) will set minimum terms and conditions of employment for employees across whole industries or occupations, regardless of who they are employed by or whether they are members of a union.

We’ve focused on some of the key things employers need to know or start thinking about to ensure they are prepared for FPA bargaining.

The proposal to implement FPAs was one of the most significant and controversial changes in the employment space, according to an employment lawyer.

Who will bargain for your industry?

During FPA bargaining, employees are represented by unions, and employers will be represented by employer associations.

To be eligible to represent employers in FPA bargaining, an employer association must:

• Be an incorporated society
• Have a constitution which enables the employer association to represent the collective interests of covered employers for the purposes of bargaining for a FPA
• Have at least one employer member who is covered by the proposed FPA.

If there is no employer association who is willing or able to represent employers in FPA bargaining, Business New Zealand has the right to step in and represent employers as a “default bargaining party.” However, a potential complication is that Business New Zealand has, to date, made clear that it does not intend to be involved with FPA bargaining.

While it remains to be seen whether Business New Zealand will maintain this position going forward, there is presently the possibility that employers will have no representation. Should this occur, the union which initiated the bargaining will be able to apply directly to the Employment Relations Authority for the terms of the FPA to be fixed and imposed on the industry.

To avoid this type of scenario, employers should start thinking about whether there is an employer or industry association which can represent their interests in FPA bargaining, whether any such association needs to go through a process of modifying its constitution to enable it to participate in FPA bargaining, and whether it has the necessary resource and expertise to do so effectively.

The International Labour Organisation gave its support to New Zealand’s Fair Pay Agreements.

Communicating about FPAs

One of the difficulties with FPA bargaining will be ensuring that all of the employers and employees who are potentially covered by a proposed FPA are kept appropriately informed at each stage. As a result, the FPA system expects employers and unions to play an active role in ensuring that this occurs.

In the first instance, the union who initiates the bargaining is required to use its best endeavours to identify and notify each union and employer which has employees that will be covered by the proposed FPA, that FPA bargaining has been initiated.

Once notified about FPA bargaining, each employer then has its own notification obligations it needs to comply with. Specifically:

• Within 15 working days of being notified that FPA bargaining has been initiated: An employer must notify all unions who have members who are employed by the employer and who are covered by the proposed FPA.
• Within 30 working days of being notified that FPA bargaining has been initiated: An employer must notify all of its employees who are covered by the proposed FPA. As part of this employers are required to provide employees with a form that allows them to opt out of having their name and contact details shared with the union.
• Between 20 and 30 working days after employees are given opt-out form: An employer must provide the union who initiated FPA bargaining with an electronic list of the names and contact details of its employees who are covered by the proposed FPA (excluding any employees who have decided to opt out).

Depending on the size of the employer and the number of unions it deals with, discharging these notification obligations may involve a reasonable amount of work. Where employers don’t meet their responsibilities in this regard, including missing the relevant deadlines, there is the possibility of financial penalties being imposed. It is therefore important for employers to ensure that their staff lists and contact information for employees and the unions they deal with are up to date, so that they can quickly and confidently meet their FPA notification obligations.

New Zealand businesses are likely to struggle against the complexity of the Fair Pay Agreement system, says an HR consultant.

Managing union access to the workplace

In order to secure the necessary employee support to initiate FPA bargaining, unions will in many cases need to access the sites of employers who may not have had much or any interaction with unions in the past. It is therefore important for employers to understand their rights and obligations when unions wish to access the workplace.

The starting point is that if a union already has a collective agreement with an employer (or is in the process of negotiating one), they have a general right of access to worksites where employees covered by their collective agreement work. While that access right is subject to various obligations, including to only enter at reasonable times and to comply with relevant health and safety procedures, the union does not need to request or be given the approval of the employer to access the site.

In the case of unions who do not have a collective agreement, or who seek to access a site which is outside of coverage of any existing collective agreement, they do need to obtain employer’s consent before accessing a worksite. Such consent cannot be unreasonably withheld, and any decision by the employer on whether to grant or decline an access request must be communicated in writing within one working day. If an access request is declined, reasons must be provided in writing.    

The position changes slightly if a union is a party to FPA bargaining. In this scenario, a union which is a party to the FPA bargaining will be able to access sites where employees covered by the proposed FPA work without needing to obtain employer approval (and regardless of whether there is a collective agreement in place). Importantly, this special FPA access right only applies if the purpose of a union’s site visit is connected to the FPA bargaining (for example, if the union wishes to update employees or is seeking feedback about the FPA bargaining). If a union is proposing to access a site for some other reason unrelated to FPA bargaining (for example to recruit new members), then the general access rules apply.

Importantly, employers have a right to ask unions why they are seeking to access a worksite. Therefore, if employers are in any doubt about the reason a union is seeking to access a worksite or whether the FPA access right applies, they would be well-advised to ask the union representative to disclose the purpose of their visit.

Finally, if you want to know about the bargaining process, we’ve prepared a breakdown of the key steps in FPA bargaining beginning with initiation through to validation of a FPA.

Alastair Espie is a senior associate practicing employment law at Duncan Cotterill in Auckland.

The Employers and Manufacturers Association chief executive sees ‘nothing but problems with the vaguely written legislation’ of the FPA.