Employment Relations Amendment Bill (No 2)

The debate on this part includes schedule 2.

I think members will agree that Part 2 is not quite as substantive as Part 1, which we have just debated. I ask my colleagues, especially those who are more involved in the law—in particular, industrial law— to have a good look at Part 2. I specifically ask them to look at schedule 2, “Consequential amendments to other enactments”.

The question I ask members opposite, and through the Minister in the chair, the Hon Chris Finlayson, to the officials, is whether we can be absolutely sure that the right reference is cited in section 83(2)(a) in schedule 2. There is a reference there to section 223D of the Employment Relations Act. I just inform the Minister that there is no section 223D in the Employment Relations Act. I am using the statute from the lobby; the 1 April 2009 edition. It may be that changes have been made since that time. But I note there is a section 224 in that Act and that the reference to a demand notice appears to be correct. There is always a question in these things about whether one is working from the correct copy of the legislation. In the case of the next reference, it appears that section 83(2)(b) refers accurately to section 224. But in the case of section 83(2)(a), the reference there is not accurate.

It might be that the reference should be to section 223(1)(c). That is a provision that ties the Employment Relations Act to the Holidays Act, and deals with the powers of labour inspectors in that particular area. It is not even section 223(1)(d), because that relates to the Minimum Wage Act but it is a matter that is meant to relate to holiday pay. That of course must refer to the Holidays Act and the proper references within this area. I say to the Hon John Carter, my old friend and colleague who is now in the chair, that occasionally there is a lot of politics in these things and occasionally there appears to be a minor error in the drafting. But when we have a mis-reference when relating something to an Act, it could well end up being an inaccurate reference.

The Minister, of course, has a group of officials who are working with him and for him, and if the Minister did indicate that the lobby copy of the legislation is out of date, and I am wrong, I would be happy to concede on this point. But if the lobby copy is accurate, it may be that the Minister would want to scribble an amendment in order to change the reference to the Act to read “section 223(1)(c)”, which I think is the accurate reference. I am getting a bit of a nod. I want to plead guilty, because for at least half an hour I was a member of the Transport and Industrial Relations Committee during its deliberations on the bill and I missed this wrong reference on the way through. It does not happen very often, and I will apologise to the Committee for making an error if it is—

💬 Michael Woodhouse: I could have saved you further embarrassment.

I thank the member. If he wants to take a call to clarify this matter, I am happy to come back after that.

In respect of the speech made by the previous speaker, Mr Mallard, I draw his attention to clause 36 in Part 1 of the Employment Relations Amendment Bill (No 2), which inserts new sections 223A to 223G. So, in fact, he is quite right: there is no section 223D in the Employment Relations Act as it currently is in the lobby, because those new sections are being inserted by Part 1 of this bill. Therefore it is necessary to refer back to that section in schedule 2, and therefore there is no need for any change. I look forward to the call and the apology that he has offered.

I want to follow on with clause 40, “Transitional provision”, rather than clause 39, “Consequential amendments to other enactments”. The transitional provision clause is the reference to the individual employment agreement and the requirement under new section 10 that the employer must retain a copy of the individual employment agreement or individual terms and conditions of employment. Clause 40 clarifies the fact that that provision applies whether “individual terms and conditions of employment were provided to, or agreed with, the employee before or after the commencement of this Act.”

The transitional provision and the reference to the individual employment agreement is very important because in this area also there will be the question of whether a 90-day no-rights provision will apply. It will include the “take it or leave it” employment agreements that we have talked about previously. With regard to the individual employment agreement that is being referred to here, whether it be agreed before or after the commencement of this Act, whether it has any reference, and whether it was a genuine negotiation is, of course, irrelevant because “take it or leave it” provisions appear to be acceptable to this Government.

We have heard members opposite arguing that that is a matter of choice. Those of us who know what people feel like when they are out of work and struggling to make ends meet know that “take it or leave it” employment offers, particularly in periods of high unemployment, are not at all a matter of choice. I think that we will find plenty of people in the Mana electorate in that particular situation: they do not have a job, they would like a job, and if they are offered a job with an individual employment agreement with a 90-day trial provision there will be no negotiation or choice associated with the matter.

I think a number of other transitional arrangements really should be included in this part. We will be going from a situation where the 90-day no-rights provision applies to workplaces of fewer than 20 employees to a situation where they apply to all workplaces. The majority of New Zealand employees work in large workplaces; although the majority of workplaces are small workplaces, the majority of employees are employed in large workplaces. These changes bring those workplaces into the scope of the legislation.

I wonder whether some transitional arrangements are required around, for example, the ability of Work and Income to deal with these changes, because the provision does not require an employer to provide any reason for a dismissal. Not only does the worker not have the right of redress, but the worker does not actually have to be given a reason why they have been dismissed. Under our benefit system people can be stood down from their right to access a benefit if they have lost a job because it is their own fault. In a situation where they have no idea why they have lost their job, Work and Income have to intervene.

We sought advice from officials on this matter and we were provided with advice. In summary, the advice is that if the employer does not respond to a request from Work and Income to give a reason, then it will take whatever reason the employee gives them. But if when Work and Income contacts the employer they assert a reason, even if they have not told the employee why they have been dismissed—they could make it up on the spot—that reason will be accepted by Work and Income and there is no right to challenge it. Potentially the provision could deny somebody access to a benefit.

We are applying this provision to all workplaces, so the extent to which Work and Income will be required to make those sorts of judgments and to deal with those very complicated situations will increase. I wonder whether there is a need to look at or change the transitional provisions.

I wonder also whether any thought has been given to the change in culture in our workplaces. It is quite hard to have transitional arrangements about change in culture, but the fact of the matter is that at the moment most employees are working in workplaces where they can challenge unjustified dismissal.

I will continue, if I may, on the theme of the transitional provision in Part 2 of the Employment Relations Amendment Bill (No 2). My colleague Carol Beaumont made some very good points about the questions that are still there about the 90-day provision, but I will be a little more positive for a moment about the reference in the transitional provision.

Clause 40, “Transitional provision”, refers back to new section 64, “Employer must retain copy of individual employment agreement or individual terms and conditions of employment”. That is one provision in this bill that Labour supports, but we did not get to talk about it, because we did not have enough time in the debate on Part 1. We support that provision. We support workers having the right to their individual employment agreements in writing; they are supposed to have those anyway. We think that is an improvement on the current situation.

There is another reason why we think it is an improvement, although I do not think it will help the hapless souls who are employed under the 90-day trial period provision—all of those in every workplace in New Zealand who change jobs in the future. When we go back to the Department of Labour research on the existing arrangements in workplaces of 20 or fewer employees, it is very interesting to look at what was happening with individual employment agreements. One in four of the workers end up with no job. The 90-day trial period was supposed to create jobs for all of those people, in particular the so-called vulnerable workers—migrant workers, Māori workers, and so on—but there was no evidence to show that it contributed to increasing their employment in any way, shape, or form.

Not only that, but when we looked at the other parts of the evidence in that survey we saw that some of the employers did not even put the conditions in writing. There is a pretty widespread practice out there of having individual agreements that are not in writing even though it is a current requirement of the law. It is a current requirement of the law. Even when employers put the agreement in writing, of course, the conditions were non-negotiable. It is one thing to have a written individual employment agreement, and we support that; it is another thing to have a non-negotiable individual employment agreement.

That is the problem all the way through this bill. The whole 90-day trial provision is not voluntary, and it will not be subject to good faith. Good faith is meaningless in this situation. We have heard and relayed some of the stories about the impact of that provision.

The same report said that employers generally did not seek employees’ acceptance of a trial period in an individual agreement; rather, it was stated in the employment agreement with other terms and conditions. For most workers applying for a job, the job is conditional on their accepting a trial period. So although we support this transitional provision and its reference back to new section 64, the Prime Minister’s statement, and other Ministers who said that the 90-day trial period could be entered into only by agreement between the employer and the new worker at the beginning of the employment relationship, have been shown by their own department’s research to be completely untrue, and to be utter rubbish.

I noticed also during the consideration by the Transport and Industrial Relations Committee that it made a change to new section 64, which the transitional provision refers to, by inserting subsection 2A to make it clear that the employee may have access to a copy of the employment agreement retained by the employer. That is a good idea. I think that is a very good idea. Of course employees should have access to their individual employment agreement. But, you see, the reality is that in many workplaces they do not. That provision is good and will improve the situation.

However, many, many employers who will take advantage of and exploit the 90-day trial provision will ignore it anyway. It is meaningless for them. We have heard from many workers that they are told that employers are using the 90-day trial period so they do not have to give them an agreement; they do not even have to agree to it. We can write these things down, and they are improvements, but I have to say that I have no confidence that they will make a huge difference.

Just picking up the point of my colleague Carol Beaumont about transitional provisions, and what could be considered, I wonder how on earth we are going to get an education programme going and what resources the Minister and others are planning to put into this. This is a huge change.

I would like to comment, particularly in relation to the transitional provisions of the Employment Relations Amendment Bill (No 2), on comments made by both Carol Beaumont and Darien Fenton. We are looking at individual employment agreements and how that provision will work. Although they must be in writing, we know that the Employers and Manufacturers Association will be busy pumping out those individual employment agreements to employers, as we saw in the 1990s. When redundancy had to be referred to, those agreements said quite clearly that no redundancy compensation would be paid.

We know that in terms of these individual agreements it will be very much, as my colleagues have said, a “take it or leave it” situation. That is what National members refer to as choice in this situation. National members say that of course there is a choice. We say that workers will have no choice as to whether they accept this Draconian provision that means they can get sacked within the first 90 days whether or not they are given a reason, and whether or not there is a good reason. When we say that employees have no choice, the Government’s response is to say that of course they have a choice: they can either take the job or leave the job. We say that that is not a real choice.

Carol Beaumont touched on, again, a possibly unintended consequence, but one that from a transitional point of view will create a real problem in the future.

That would be along the lines of an employee getting a pumped out “take it or leave it” employment agreement handed to them, courtesy of the Employers and Manufacturers Association, for which the employer pays a fee. Employees know that they have no choice but to take the agreement, and they sign up. Things might go really well. They will work and try to do the best possible job they can. Then they make the fatal mistake of putting too much sauce on the fish, or whatever. They are called in and told that in the agreement that they have a copy of, they will see quite clearly that they can be sacked for any reason, and the reason they are being sacked is that—well, they will not be told why; they are just let go. What a funny term “let go” is. It sounds as if one is being really kind and nice, as if it is a nice thing to do.

The poor employee is let go. John Key has talked about job creation, so they are sure there will be a lot of jobs they can find out there. People search and search, but of course there is nothing, because this Government has not created any jobs. As previous speakers have said, most workers are staying in their jobs because they are too fearful to leave, and because if they go to a new job they will have these Draconian conditions imposed on them, particularly after this bill goes through.

Eventually people will have to make ends meet, so they will have to do something they did not want to do, which is go to Work and Income. Their case manager will ask why they are no longer employed. They will say they do not know, but that their employer has let them go. The case manager will ask whether it was their fault, and they will say that they do not know whether it was their fault, because the employer did not tell them anything. They will be told that they have to wait. Those poor people will be waiting to see whether they are eligible for a benefit—a very small benefit, but something to put a bit of food on the table while they are searching for those non-existent jobs.

I ask the Government to consider where the human rights are in that situation. We could have a situation in which a Work and Income case manager asks an employer whether the termination of a job was the employee’s fault. The employer will say to Work and Income that it was the employee’s fault and they will feel quite confident in telling Work and Income about the reasons, because they have nothing to lose. We will have the ludicrous situation in which that poor person will, for reasons completely unknown, lose his or her job, and will then be told by Work and Income—

I see that Lynne Pillay wished to continue her speech; I apologise to her. But I will continue in the same vein.

It seems that it is a very good thing to have a written employment agreement constructed and kept by the employer as a reference point. On one hand, it means there is something to refer back to, to see whether the employer is matching the requirements in that agreement. On the other hand—as the previous speaker pointed out—employers’ organisations will construct a standard agreement that contains the 90-day provision without any reason being required for dismissing a person within the first 90 days. That agreement will be sent out to every employer, and it will almost be a black mark against them if they do not use it. Employers are very organised in that respect, in making sure that all other employers keep in line. Supposedly, there is a choice in terms of whether people go into the 90-day arrangement; in fact, people will not be able to get a job anywhere else, because all contracts will have that 90-day provision in them. People will have the choice between having a job and not having a job.

I agree with Lynne Pillay that there will be euphemisms such as letting people go instead of sacking them. They are all excuses. Another one that came up was that a person could be overqualified. Employers might say that a person is a very nice worker but is overqualified and that they will let that person go and get somebody else. Those are not real reasons, and reasons will not be required under the 90-day legislation, but we can see how things will operate.

The changes are all completely unnecessary, because, particularly in the labour market we have now, where there is a high level of unemployment, any reasonable employers will not be looking to recruit people for 90 days. They will be recruiting to get the best person on a permanent basis, providing the training from day one, and spending their money on that training. Having that 90-day provision has nothing to do with the quality of the employees being hired and has everything to do with being anti-union, as in the examples given before: sacking people if they show any sign of standing up for their rights, linking up with the union, or whatever. That will be the primary reason why people are sent down the road.

Workers who are pro-union and who will be sent down the road are, generally, the better workers. I have found that the more one stands up for other people’s rights, the more confidence one has in one’s own rights and skills. Those people tend to be the better workers; they will be the ones who are sacked.

In my experience it has been the most unionised workplaces that have put out the better product. I used to work at New Zealand Motor Corporation in Pētone, producing Honda cars. We had a strong union there, and the quality of the Honda cars was great. My partner worked out at what was then Todd Motors, which then changed to Mitsubishi Motors New Zealand, where the union was much weaker. Quite a lot of people got annoyed with the conditions there, and there was a bit of sabotaging of cars, actually. The quality of the cars coming out was lower, because the union was less strong.

It is actually in the employer’s interest to have a strong union in the workplace, but a lot of employers do not operate in that way; they just want to run the business their way. Trevor Mallard gave some examples of that, particularly of employers who have a small business, where the boss is more concerned with keeping control over everything than in having a collective workforce that works well together.

To summarise, the existence of this written agreement has its positive sides. But in the hands of the employers’ federation, it will probably lead to a universalisation of this offensive 90-day provision.

It is a pleasure to take part in this debate on Part 2 of the Employment Relations Amendment Bill (No 2), which contains the transitional provisions of such an innocuous-sounding bill.

This bill is, of course, the fire-at-will bill. That is how it is known in the streets, factories, and workplaces of New Zealand, and quite rightly so. It is the legislation that generalises the so-called pilot, which allows workers to be sacked without cause or explanation in their first 90 days of employment, and extends that provision to every single workplace in New Zealand.

The Labour Opposition, along with our colleagues in the Greens and others, is, of course, fighting this bill every step of the way. It is appropriate in the debate on the transitional provisions to ask what kinds of workplaces and what kind of country this bill is a transition to. I will ask some specific questions about that issue. Is the legislation a transition to an ethically based system of industrial and employment relations? What would an ethically based system look like? Arguably, an ethically based system would respect the rights of all members of a company, whether they were directors, management, or employees.

This bill, quite simply, does the opposite. This bill commoditises human beings: it treats human beings as commodities, as a factor of production alongside timber, bolts, and oil. People are not commodities, and they should not be treated like commodities. The idea that a New Zealander can be sacked without so much as the dignity of an explanation as to why, when it will affect their entire future, is not an ethical basis for law. It will affect not only their current earnings and mortgage, but also their opportunity to get another job in another place, because they will have to explain why they lost their previous one.

💬 Jo Goodhew: I raise a point of order, Mr Chairperson. I am just wondering about the relevance to the part under debate.

The CHAIRPERSON (Eric Roy): I am listening, and it is just inside the scope, but I ask the member to bring it in, please.

Let us now consider the economics of this transitional provision. When this legislation comes in, will it be a transition to a more productive workplace? It will certainly be a less ethical workplace. Here history provides a guide. During the 1990s there was an Act called the Employment Contracts Act. It was, at the request of certain employer groups, designed to make labour markets more flexible. What could be wrong with that? Flexible meant easier to hire and to fire, and lower wage and labour costs.

The economics of the Employment Contracts Act have been well documented. When the economy transitioned to that industrial law environment, labour productivity went down. Why did it go down? Because the cost of labour fell relative to the cost of capital: more workers and fewer tools equal less output per worker per hour. That is a key reason why in the 2000s the New Zealand economy has been much less productive than, for example, our Australian colleagues’ economy.

Mr English has, in question time, been debating with me, Mr Anderton, Mr Parker, and others whether we are catching up with Australia. I will provide some data, care of the Hon Jim Anderton, which is a combination of OECD, Australian Bureau of Statistics, and Statistics New Zealand numbers. It measures real GDP per capita at purchasing power parity, and it shows that in 1984 the gap between Australian and New Zealand workers was 13 percent. In 1990 it was 21 percent. In 1999, when Labour took office, it had grown to 34.2 percent, which is extraordinary. By 2005, under the previous Labour-led Government, it had dropped to 29.8 percent. It held steady at 29.8 percent to 2006, but here is the kicker: by 2009 it had increased to 36.1 percent, and in 2010 the gap between New Zealand and Australian incomes had risen to 37.4 percent. I ask how long it will be before it hits 40 percent. Nobody can argue that we are catching up with Australia. We are going in the opposite direction.

The CHAIRPERSON (Eric Roy): I caution the member that he is getting outside the scope of the debate, which is on either the consequential amendment or the transitional arrangements.

Thank you, Mr Chairman. I appreciate your guidance on that.

I have been trying to ask in this debate on Part 2 of the innocuous-sounding Employment Relations Amendment Bill (No 2), the fire-at-will bill, what transition this bill implies for New Zealanders; for New Zealand workers, who will be treated as commodities; and for the New Zealand economy, which will have its labour productivity reduced as the incentive to use financial and technological capital goes down because commoditised workers will be cheapened. That is a nonsense economic strategy. We will never compete with the good old People’s Republic of China on wage rates. They pay 50c or $1 an hour; we pay a minimum wage of $13 an hour or thereabouts, and, of course, we want to see that rise. We want to be a high-value, high-income economy, where people choose to migrate, to live, to give of their best brains and smarts, and to build a brighter future. We do not want a transition to a sweatshop or a banana republic. That is what this transition—[Interruption]. The junior Government whip, soon to be the former member for Rangitata, might sneer, but everybody knows that this is a slippery, slippery slope.

Is it a transition to a productive industrial relations environment? That is the next question. I would have thought that even members opposite would acknowledge that New Zealand is, in fact, very fortunate to have a union movement that is responsible, is far-sighted, looks at the bigger picture, and looks for the win-win situations. Gone are the days—although he had some redeeming virtues—of Jim Knox and the head-butting style of engagement. The New Zealand union movement wants to be social partners for a better future. This Government is taking that opportunity and rubbing unions’ noses in the dirt, and telling them to swallow this. It is saying: “We won. You lost. Your workers get it in the neck with the 90-day fire-at-will bill—no ifs, no buts, no explanation. Down the road, bucko.”

I just lament the stupidity of this move. I lament the lack of humanity of the move. I lament the lack of the most basic understanding of economics that is embedded in this move. I lament, frankly, the short-sighted greed of employers who have lobbied for it, and I lament the lack of spine of a Government that refused to stand up to those employers or, perhaps, believed it was the right thing to do.

Debate on transitional provisions is the time when we ask ourselves what future we are transitioning to. What kind of future do we want for New Zealand? People all around the Chamber and those at home should be asking themselves, because we are at a critical time in the economic and political cycle, what sort of future we want to transition to. Will it be an ecologically responsible, ethically based, technologically advanced, high-value economy, with people choosing to migrate to New Zealand, not away from it? Will it be a New Zealand where workers are paid good wages and salaries because we are innovative and smart, and make great products that people want to pay a premium for, with a reputation as a premium brand that leads the world in our chosen market niches? Is it that kind of future—which is clean, green, clever, and wealthy—or is it the opposite? Is it a slippery slope to a banana republic, where workers are paid pitifully by employers who cannot see beyond the end of their noses?

Here is the tragedy in this transition. I think most employers are actually better than that. I think most employers would regard this as kind of a sideshow and quite unnecessary. That is the tragedy of it. The Government has kowtowed to a few ideologues to pass a law that is bad for workers, bad for the country, and even—in the end, actually—bad for employers.

Labour laments this bill. Of all the legislation that has been considered by this Parliament so far in this term, this bill ranks right up there as one of the dumbest things—except the lunacy of the tax cuts, but I will leave that aside—that this dumb Government has done since New Zealanders were dumb enough to elect it.

I move, That the question be now put.