New FPAs — what do they mean for me?
On May 7, 2021 the Government announced that it will be delivering on its pre-election commitment to implement Fair Pay Agreement (“FPA”) legislation. It is expected that this legislation will be drafted and introduced in late 2021, with a view to it being passed in 2022.
While we have known that FPAs have been on the Government's agenda for a number of years, its introduction will undoubtedly be one of the most significant changes to the employment landscape in recent times.
In this article, I will set out what FPAs are, how they will work, and where we are likely to see the impact of FPAs.
What is a Fair Pay Agreement (FPA)?
An FPA will be an agreement that sets minimum standards for all employees and employers in an industry or occupation. Yes, you read that correctly — for all employees and employers, across an entire industry or occupation.
FPAs will set base wage rates, ordinary hours, overtime and penalty rates across specific industries or occupations where they are agreed. Other topics that must be discussed at FPA negotiations, but do not have to be agreed, include redundancy, leave entitlements, skills and training, and health and safety.
An FPA can also contain regional differences in terms and conditions, as long as they comply with the Human Rights Act and minimum employment entitlements.
FPAs can sit alongside Collective Agreements, which can still exist within specific companies or across an occupational group, but must be on top of the minimum standard set by an FPA.
Unions will represent employees within an industry or occupation (including non-union members), and employers will choose representatives who meet specified requirements. In this regard the Council of Trade Unions (CTU) and Business NZ will each receive funding to support their coordination roles in the FPA system.
Only unions, not employers, will be able to initiate bargaining for an FPA. To initiate, the union would apply to the Ministry of Business, Innovation and Employment, demonstrating that they have met either:
• The Representation Test: that they have the support of 10 percent, or 1000 employees (whichever is lower) within an industry or occupation to initiate bargaining, or
• The Public Interest Test: where there is evidence to show that there is either low pay, low bargaining power, a lack of pay progression, or long hours or contractual uncertainty that is not adequately compensated within an industry or occupation and that an FPA would be deemed to be in the public interest.
The initiating union must decide which work they want covered. This could be based on an occupation (eg bus drivers), or on an industry (eg supermarkets). If there is an overlap in coverage between two FPAs, the second one only applies if the workers would be better off overall. Currently, contractors are not included in coverage.
Once bargaining for an FPA has begun, the proposed process ensures it will also come to an end. In this regard, once the parties reach an agreement, the FPA can be ratified with a simple majority of both employee and employer voters.
• Employers will have one vote per employee in coverage, with a slightly higher vote weighting for employers with fewer than 20 employees in coverage.
If a first ratification vote fails, the parties will go back to bargaining. However, if a second ratification vote fails, the FPA will be referred to the Employment Relations Authority for determination. Industrial action cannot occur during FPA negotiations.
Based on recent comments from both the Workplace Relations Minister, Michael Wood, and CTU president, Richard Wagstaff, it is highly likely that the first FPAs to be initiated will cover those employees working in critical roles like cleaners, supermarket workers and bus drivers. However, the legislation will not limit this to just those groups. Any union that can meet the initiation criteria will be able to commence the process for an FPA in the occupation or industry of their choosing. This could lead to widespread activity across multiple industries or occupations. Watch this space.
I recommend connecting with your relevant industry or employers' association, which no doubt will be keeping a close eye on developments and providing updates to members, in what appears to be one of the most significant changes to the employment landscape in recent times.
Disclaimer: The information contained in this article is of a general nature and is not intended as legal advice.
■ Craig is the HR and employment relations specialist for Business Central in Hawke's Bay and Gisborne. Email: email@example.com