Fair Pay Agreements Bill

Members, we come now to Part 7. This is the debate on clauses 130 to 163, “Finalisation of proposed agreement”, and Schedule 2, “Ratification process: number of votes for covered employers”. The question is that Part 7 stand part.

Thank you, Madam Chair. I will just make the point that this part is quite a substantial one with lots of different issues in it, and we will try and work our way through it systematically. But, fundamentally, it’s around what happens when the bargaining has been completed, and clauses 132, and so forth, relate to how the Employment Relations Authority (ERA) assesses and, if it’s up to scratch, approves the agreement, and then it sends it off to be ratified by both the union and the employer side. Then the ERA, sort of, has to verify whether or not the vote is correct and in favour. And, then, once that’s all happened and the various checks are made, it is brought into force through secondary legislation, and the chief executive has to issue the notice. Then, we’ve got all the complications about who it entails. So I just hope you don’t cut us off too soon in our discussion of this part, because there are many different elements to it and we want to have a chance to work our way through them.

So starting off with the whole question of the assessment of the ERA into the agreements, in themselves, when it’s finalised—or, fundamentally, I suppose, the broad point I’d make is that once it is finalised, it applies to everybody: all employers and all employees within its coverage. So that is, I suppose, one of our fundamental objections to this legislation—that there is no choice involved. That’s why we call it mandatory union deals rather than fair pay agreements, because, you know, a bunch of people negotiate the agreement between the union and the employers, and if there are a thousand different employees—ranging from, if we were talking about checkout operators, Foodstuffs and Progressive Enterprises at one end, to mum and dad owners of a superette in Hokianga, at the other end of the spectrum—some of them will be involved in the discussions, most of them won’t. There’s a lot of debate about how much information will filter down to the small operators and how much will filter back from the small operators and who will listen. But, regardless of all that, when it comes to the crunch, if it works its way through Part 7 of the bill and comes out the other side, it applies to everybody—and they haven’t had much of a say about what’s happened. The vast majority will have no direct say in the outcomes that affect them directly. We don’t think that’s right, and we don’t think it will help them in any particular way.

But, then, when it comes to the ratification, in clause 140 and following, and the entitlement to vote—the Ministry of Business, Innovation and Employment (MBIE) is not required, as far as I can see, to consider each vote cast; they just have to take a little sample of the votes. I don’t quite know how the Minister thinks that would reassure people. So if you had a vote that was close and you had, you know, a thousand different employees trying to agree to this, or 2,000 employees, you actually do need to have quite a process in place to ensure that you get a democratic outcome. So the first thing I want to know is a response from the Minister as to the extent to which he’s satisfied that MBIE will have the time and patience and ability to verify those votes, rather than just taking the word of both sides and a swift, sort of, sample, because I don’t think that that is sufficient to do the job properly. Then, when it comes to—actually, I’ll leave it there for the time being and I’ll come back to it.

I want to ask the Minister specifically—get this section right—about the time frame for the authority to assess the proposed agreement.

So once the fair pay agreement (FPA) has been negotiated and both sides have decided that they’ve come to an agreement and it goes to the Employment Relations Authority (ERA) for assessment, they’ve got their 20 working days in order to come back with their determination.

In the bill here it says that if there is determined to be exceptional circumstances, then that date can be extended. So my first question is: what are those “exceptional circumstances”? Where do we set the bar for those exceptional circumstances? I mean, the ERA has already had 20 working days to work out if there are any overlaps or if they approve the FPA. So I’m keen to know what the exceptional circumstances are. That’s important because it then triggers another 20 days—sorry, I’m confusing myself. It’s a very confusing the bill. So that’s the stand-alone part: what are the exceptional circumstances?

The bit that triggers another 20 days, of course, is the overlap. So if the ERA determines that there is an overlap between two FPAs that have been recently conducted, that triggers another 20 days. In the bill it talks about the ERA having to determine which of those terms are more favourable. I want to know from the Minister, what is the framework that they make that decision in? Because in some cases, it might be quite clear cut; it might be extra days or extra pay. But in very different sectors, there might be a grey area as to what is more favourable to the employee.

So my first question is around the exceptional circumstances. That exceptional circumstance clause kicks in both for the initial determination by the ERA and it also kicks in if they are taking an extra 20 days to work out if there’s overlap and which terms are more favourable. So that’s my first question: what are those exceptional circumstances and where is the bar?

Secondly, my question is around what framework will the ERA use to determine favourable terms? As I mentioned, in some cases it might be very clear-cut—totally understand that—but in some cases it may not be so clear-cut. So what framework does the ERA use in order to determine favourable terms under different fair pay agreements? So if the Minister could address that, that would be useful.

In response to the Hon Paul Goldsmith’s and Erica Stanford’s questions: Mr Goldsmith, in one breath, said that the majority of employers would have no say in fair pay agreements (FPAs) but then went on to ask questions about the ratification process which, by definition, they all get to vote in. He asked about the processes, effectively, for Ministry of Business, Innovation and Employment (MBIE) oversight and, I suppose, there being a level of confidence in the accuracy of that vote. I do note that there are very specific provisions in the bill about the bargaining sides having to provide information about that vote and its result. It is on those bargaining sides to provide a declaration to that effect, so there is a strong duty that is placed on the bargaining sides in the legislation, which I think can provide real confidence there. On top of that, MBIE then does have the ability to assess a sample. In the event of a close vote, MBIE would act rationally and would have the ability to look at a larger sample to give themselves the assurance that they felt was necessary for that particular ratification process.

In terms of Erica Stanford’s question around “exceptional circumstances”, this is wording in a concept which is picked up from the Employment Relations Act. It would depend on the particular nature of the case: the complexity of the bargaining, the degree to which it had been a smooth process, perhaps, or a rocky process. MBIE would need to take those things in the round, and if they believe that, on a qualitative basis, there were exceptional circumstances they have the ability to take a little bit more time there.

The other question the member has was around the framework for the better-off overall test. I just note this is a reasonably well-understood concept in employment law; it’s the process which, for example, is used in the Australian jurisprudence in respect of their modern award system. It is an overall assessment that in MBIE will apply across the terms and conditions in those FPAs as they affect the majority of workers. So it’s not necessarily a strict “look at this condition”, “look at that condition”—it’s looking at it in the round and forming an assessment as to under which FPA the majority of employees would be better-off.

Thank you, Madam Chair. I want to continue that line of questioning of Erica Stanford’s in relation to bargaining overlap. It seems to me that the clause 139 of Part 7 is, without doubt, the most comically confusing that I have read in a very long time.

So my first question relates to the issue of coverage overlap. It appears to me that the question of coverage overlap is not addressed at any stage in the initiation bargaining process between employer and employee groups. It would strike me as fundamental to understanding and avoiding coverage overlap that that be the case.

Now, I may be wrong, but I’ve had a good look; I can’t see any requirement to make sure that the boundaries of coverage are more clearly articulated to avoid coverage overlap. So that’s the first question: is there a way of avoiding this? Is this some sort of belts and braces exception? Because one could think of many, many scenarios—I think Mr Goldsmith’s already gone through a couple—where industries or occupations do overlap at some point.

Then we come to this—the only way I can describe this is a—comical process set out at clause 139 where a party or parties unrelated to the agreement are either bound in or biffed out, depending on which agreement is more favourable. So in the scenario of agreement A providing better terms overall, then the authority must advise both bargaining sides for agreement B that aren’t the party to agreement A that they’re no longer a part of agreement B,; they’re now part of agreement A.

Now, even if one agrees that there is the potential for coverage overlap, there must have been a much-simpler way of joining these two agreements so that if the intention is that the best terms overall are accorded, this is a really, really odd way of doing it.

The other question that I have in respect of that is: what legal advice was provided or asked for in respect of whether this is even lawful in contract law? I mean, obviously the legislature has its own cognisance, but it seems to me that this is a very bad breach of the principles of contract law and the principle of privity, which is that one can’t bind third parties to agreements to which they are not a party. They didn’t negotiate them. Agreement A is separate from agreement B, even if there is overlap. One can’t then draw on employers—and employees for that matter, although they’re probably pretty happy about it—that were not a party to subsequent negotiations and then say that because agreement B provides better terms overall than yours, you’re now bound by that agreement. Even though those parties had absolutely nothing to do with the negotiations, the costs and requirements will fall on them. Even the employees who may be members of one union are, effectively, told that they’re no longer part of the agreement to which they have contributed.

That’s why this is comical. That’s why this is going to turn into a complete farce and the risk to both employers and employees, of a complete muddle, is very high. So do we have clauses in the bill that prevent, to the degree possible, coverage overlap? Was there consideration of a much more straightforward process to deal with coverage overlap when terms and conditions are better in separate agreements that avoids this farcical process? And how does that reconcile with the very well-established principles of contract law, where one shouldn’t be binding parties that are not subject to that agreement?

Responding to the member’s question, there are provisions, I think, in Part 3, which set out a structure to avoid, as much as possible, there being overlap that might emerge subsequently. The member is right, perhaps, in describing the provisions of Part 7 as being “belt and braces”, that in the event that that does arise, there needs to be clarity as to which agreement applies.

In respect of the member’s second question, which is about his assertion that parties who might not have been involved in another agreement will get brought into it, I don’t agree with that. By definition, if work is covered by another agreement, the employer would have had the ability, in the bargaining of that agreement, to have participated in that process from the point of its initiation.

Madam Chair, thank you, and, really, it is leading on from the discussions that we have been having and the concerns that were brought up in the Primary Production Committee from a lot of employers about this flow of information up and down. Many employers were concerned that they may not know or, as the Hon Michael Woodhouse has said, might find out at a later date that their entity is being covered by another set of negotiations. This was very much the crux of a number of employers’ concerns about this legislation: that it was going to be very difficult for employers to know when they were going to be covered, and the fact that they might be pulled in under other coverage that they were not involved in the negotiations for.

I guess, as an employer for 23 years, the thought of setting your budget on what you thought were the known costs that you were going to have for the coming year, only to find perhaps that, at some stage down the track, better terms and conditions then have overlapping coverage with part of your entity, throw your budget out completely. And so we can understand why employers were so concerned about this.

And, I guess, the other part of the voting component of it are concerns there about what will constitute votes that will be able to be counted if the employer hasn’t been able to motivate their employees to be voting and, therefore, if there are a lot of small employers with small pockets of employees who might feel that it wasn’t worth them voting because, within their coverage area, there are some very big employers and they might feel that it won’t be worth them even voting on it. So the voter turnout: is the vote going to be on the majority of those that would be eligible, or is it on the majority of the turnout that will be determining this? Because I think that’s where we are going to see some very, sort of, perverse disincentives for people to bother to vote on this.

These were all the kind of things that came up on a regular basis from the select committee submissions process with employers and employees. A number of employees that had been employees in other jurisdictions—in Australia, for example—where they saw how confusing this could get for them, expressed their concerns. And I don’t think that the Minister has allayed those concerns for us about how confusing this actually could get, particularly for those small businesses and employers that are trying to motivate and get the right information through to small groups of employees who might feel quite disenfranchised from a process where there is a number of quite large groups of employees. So I just think that this is a really meaty part of the legislation that caused a lot of concerns, and I don’t feel that we’ve heard the Minister address those concerns in such a way that it will be allaying the fears of the confusion that’s going to arise both for the employees and the employers. And so I would be keen for the Minister to, perhaps, try and give us a greater level of clarification and a greater level of comfort that this isn’t going to bring about an enormous amount of confusion and disarray and people feeling disenfranchised from the process. Thank you, Madam Chair.

I can provide some clarification and correction to one of the points the member raised, which might assist with her question. It would not be the responsibility of employers to round up and organise the employees to vote; it will be the responsibility of unions to run a voting process for employees, and it will be the responsibility of the employer bargaining side to run the voting process for employers. The voting process, as is the case for collective agreement processes, will be about those who vote, not the overall number of workers in that area.

In respect to the member’s assertion that through this part, employers might get “pulled into the process”, that is not accurate. Employers will be covered by fair pay agreements, based on the coverage provisions in Part 3 of the bill, which we have already debated.

Before I make the next call, just a reminder that we have a maiden statement soon, so this won’t be a very long time.

Thank you, Madam Chair. Accepting the point that the Minister made that clause 139 was a belts and braces approach, at least as it applied to coverage overlap, and pointing me in the direction of Part 3, I thank him for that, but I’m none the wiser in respect of which clause in Part 3 that is. I think it would allay concerns to know that whereas Part 3 does go through a long process description of how bargaining parties can join and unjoin, there is, as far as I can tell, no reference to an ability by the authority to reduce the scope of bargaining between parties because of coverage overlap—I may be wrong; it may be here, but I can’t see it. It would certainly help me and those who are going to have to negotiate the various sections of the Act when it is passed to know that, to the degree possible, coverage overlap can be avoided earlier in the process.

Thank you, Madam Chair. I just want to focus on Subpart 2 of Part 7, which is around ratification, where the Minister has, sort of, made this claim that employer groups will all have a chance to be involved in the process, and if not actually part of the discussions, at least they’ll get to have a vote. But the striking thing about it, the farcical thing about it, is that what happens is, if an agreement is hammered together between the two bargaining sides, it then has to go (a) to the unions, and (b) to the employers to ratify, agree at 50 percent or more. For some reason, the unions have 40 days, and the employers have 10 days to do that. I would be interested for the Minister to explain why the two are different. But, of course, the big problem is that if, say, the employer group was not to ratify it, and they didn’t get the vote, and less than half the people—

Order, and my humble apologies to the member. Members, in accordance with a determination of the Business Committee, the time has come for me to report progress on this bill.

Progress to be reported

House resumed.

Mr Speaker, the committee has considered the Fair Pay Agreements Bill and reports progress. I move, That the report be adopted.

Motion agreed to.

Report adopted.