Mike Gould & Conor Lennon
Published on

The Fair Pay Agreements Bill (“the Bill”) provides a framework for employee unions and employer representatives of a specific industry or occupation to bargain fair pay agreements (“FPAs”). FPAs are intended to set out base minimum wage rates, normal hours of work and other minimum standards for the relevant industry or occupation. The Bill is lengthy and detailed, setting out eligibility, bargaining process, content and further details.


How FPA bargaining is initiated

Bargaining can be initiated if a proposed FPA meets either the “representation test” or the “public interest test”. The former refers to the support of 10% of the covered workforce, or at least 1,000 employees in the covered workforce, whichever is lower. The latter inquires whether employees within coverage of the proposed FPA are paid low for their work, have little bargaining power in their employment, a lack of pay progression, or are not adequately paid.

Employees are to be represented by unions. Employer representatives will be employer associations that meet the criteria set out in the Act and have been approved by the Chief Executive of MBIE. If a party does not have representation, default parties are provided. Business NZ was intended to be the default bargaining party for employers, but it has since pulled out, citing disagreement with the Bill. It is currently not known who the default body will be for employers.


How the bargaining process works

Within an FPA, several mandatory terms must be agreed on by the bargaining parties, including:

  • Base wage rates and how those rates will be adjusted during the term of the FPA;
  • Superannuation contributions;
  • Overtime;
  • Penalty rates; and
  • Coverage of the FPA.

Other content is mandatory to discuss (but not include in the agreement) such as redundancy, flexible working arrangements and leave entitlements. The bargaining parties must also ensure that all interests (of both employers and employees) are considered and represented, including Māori interests.

Once the bargaining process has concluded and the parties have reached an agreement, an FPA must be given to the Employee Relations Authority (“the Authority”) to assess and approve it. The agreement must then be ratified by the bargaining parties. After that, it must be submitted MBIE, where it will be verified and brought into force by MBIE through secondary legislation.


Dispute resolution

If the bargaining parties are unable to agree, there are mediation and support services available to them, which are based on those set out in the Employment Relations Act 2000. Application to the Authority is also possible to resolve any potential disputes and fix terms of an FPA.


Consequences for employers

The intention of the Bill is to prevent employers competing with each other to lower wages and employment conditions. However, arguments have been advanced that the Bill would result in larger companies being able to negotiate agreements that smaller ones cannot keep up with. There will also be logistical and negotiating challenges for employers within an industry or occupation, as there may be various competing interests within any given industry. Submissions on the Bill are open to everyone, and it is encouraged for everyone to have their say.

For more information, please contact Mike or Conor