Fair Pay Agreements Bill

We come now to Part 9. This is the debate on clauses 196 to 203, “Penalties and enforcement”. The question is that Part 9 stand part.

We come to the punitive side of the legislation, which is very much in keeping with many of the things going on. The keen observers of this debate will have noticed that Labour, I think, started off at the start of this committee stage—but it might have been the second reading—with 65 votes in favour. They are now down to 64, following the exit of one Dr Sharma, who I don’t feel would think he had a fair pay process—

💬 Hon Member: Irrelevant.

You’re quite right; it is irrelevant and so I won’t go any further.

CHAIRPERSON (Greg O’Connor): I’m just not sure whether you’re commenting on a member who is out of the House or not, but we’ll give you the benefit of the doubt.

OK. Now, the point I’d make around the penalties is what happens here is so we’ve got this mandatory union deal in place—or a fair pay agreement, as the Government would call it. Now, they bring in penalties, and the penalties for an individual are $20,000 and, in the case of any other person, $40,000. So what can lead to these penalties? And then if you look at that in clause 201: “Any action … at the suit of one of the following parties”: any employee, any employer, and any bargaining party. And that starts the process that leads to these penalties and a big sort of process.

And I suppose it doesn’t take much imagination to see that this creates an open book for individuals and groups of workers to initiate proceedings against their employer and create merry hell. You might say, “Well, that would never happen.” Well, it very well might happen on many occasions. Just think about it. So what would be a breach against the fair pay agreements? Well, it’s who’s included. It’s a 25 percent threshold. So one day, you’ve got workers merrily working away in your small business, your people have said—I’ve referred to Hokianga too many times, but you’ve got a Four Square up in Whangaroa or something like that, you’ve got three or four employees happily working away, and one of them has been sort of working apparently 20 percent of their time on an issue covered by an occupation—it may be cleaning; it might be 20 percent of their time cleaning—and he’s only doing eight hours a week or whatever, so that’s not very much. It might be two hours, or one day he does two and a half hours. Woompha! He’s over the 25 percent; he’s done two hours and 40 minutes. He’s over 25 percent and, lo and behold, he’s breached the agreement, and the employer is dragged before this process. It’s another process.

The only point I’d make is that the small-business operators who are, you know, juggling ram raids and smash-and-grabs and trouble and strife wherever they look and are worried about how they’re going to pay their interest rates, are worried about their prices going up, and are worried about the fact they can’t find any workers because there’s no immigration. They’re worried about all these things, and, now, thanks to this Government, they’ve got another thing to worry about: that they might get their ratios wrong and that they might have somebody who they think is 20 percent there who turns out to be 26 percent there and—woompha!—they’ve broken the agreement and they’re in trouble. All it takes is somebody who is of a mind to cause trouble to cause trouble, and they’ll be going through this long, drawn-out process.

And so the question I have to the Minister is: can he really assure the House that this is tightly focused enough? Is there any sort of threshold in terms of the severity of anything that can start a procedure? Is there a threshold or any case of a breach of the fair pay agreement? That’s all that’s required; it could be a technical breach, but there’s a lot of things that could be not quite got right because we don’t live in a perfect world. It’s fine if you’ve got 10,000 employees and a huge team in your human resources department, but if you’re a small business, you haven’t got that. It’s easy to make mistakes in this area. So it just joins the long list of things that business owners have to worry about. And I’m sure they won’t be grateful for this new addition.

Thank you, Mr Chair. Right, the penalties part. In a similar vein to my colleague Paul Goldsmith, it’s interesting to go back and look at some of the clauses that will fall into these penalty clauses, and one of those is clause 16 right back at the beginning, the “Undue influence” clause, which could see a penalty of up to $20,000.

So, in this instance, I want to talk to the Minister about the ability for a bargaining party lead on the employee’s side, in the case of most likely, it would usually be a union, to be fined under this fining section when it comes to undue influence. Under clause 16(1)(a), undue influence is said to be, for the purposes of bargaining, “to become or remain a member of a union, [or] a particular union”, right? So that then relates back to the fining regime. Yet there is the possibility in this legislation, earlier on in this bill, for a union to be able to bargain for their union fees to be covered. Does that mean, in this particular instance, that if a union, prior to going into bargaining or during bargaining, were to ask or tell potential members that, “Hey, if you join up, we’re going to negotiate your fees back so it’s basically free to join the union for the purposes of this bargaining.”, would that then fall under this penalty regime, and could, then, the union, in that case, be liable for a penalty not exceeding $20,000 or $40,000? So particularly around the unions and their ability to try and gain membership by using that particular clause, would they fall under this penalty regime?

The other question I’ve got around the penalty regime is: is it possible for an employer who restructures their affairs prior to or during bargaining to avoid having their staff covered under the fair pay agreement (FPA)? I take the example of the Four Square in Whangaroa where you’ve got four workers, each of them share four different tasks, rather than paying them all under—let’s say one of the things that they do, 25 percent each, is cleaning, there is a cleaning FPA going on, if the employer was to restructure so that only one of them did cleaning full time and the rest of them didn’t, so to have to avoid paying all of them under the new FPA, is it possible under these penalty clauses for the business to be fined or attract a penalty for restructuring their affairs during or before or even after an FPA, if their workforce was flexible and they then made it less flexible?

So I’m keen to get answers on those—that last part around the employer restricting their affairs. But also in the case of a union who’s offering membership and using the fact that there will be the ability to have the person’s fees covered in the agreement as part of the coaxing into the union—would that, then, fall under these fees as well. So just those two parts.

Thank you, Mr Chair. I think we’re into about the ninth hour of this committee stage, and all of it is happily emblazoned on my memory. So I do recall that on Thursday afternoon at some point, I did explain very clearly that a union advocating to employees about what improvements they might be able to make to terms and conditions, including the negotiation of the union recognition payment, would not constitute undue influence.

Secondly, in respect of an employer who engaged in restructuring, employers are not prevented from engaging in restructuring under the Fair Pay Agreements Bill. They would, of course, under the Employment Relations Act be required to engage in that process in good faith, and provided they did that for genuine business reasons and in good faith, there is no reason to expect that they would be liable for any penalties under this section.

Thank you, Mr Chair. Following on from both of my colleagues on the matter of the penalties—and, look, I do note, in clause 200, that the authority would give regard to the matters that are listed there, the nature and the extent of the breach. But throughout the whole process of the submissions, employers expressed their concerns with how heavily weighted against employers this legislation is. I suspect most employers have not had terribly happy dealings with the Employment Relations Authority over a number of years and so I’m just not sure that this will be giving employers a great deal of comfort in terms of thinking that if they found themselves unwittingly in breach of the legislation, the authority might take matters into account particularly favourably for the employers.

I think about a number of bits of legislation that this Government has brought in in the last wee while and how much is putting the emphasis back on the employer to know the details of the legislation. I think it was last week we were talking about immigration and how it was an expectation that the employers would intimately know changes that occurred in the Immigration Act so that they weren’t in breach of the Immigration Act. But I just feel, Minister, that this is not recognising the situation that businesses and employers are in at the moment, in terms of incredibly short of skilled employees so many employers are working 16-plus hours a day in their business.

In fact, I spoke to a hospitality business over the weekend. They had taken note of the discussion that had been going on around the immigration legislation and they were just despairing that they were expected to have that level of detailed knowledge, as well as running their own business, coping with skills shortages, coping with paying higher interest rates and all the inflationary pressures on their business. So now, again, this legislation has very high expectations on the employer in terms of the level of detail that they have to know; about how many days they’ve got to let employees know about things and how many days they’ve got to be consulting. So there’s constantly information in here that would be putting pressure on an employer to be spending time, and as my colleague the Hon Paul Goldsmith said, that’s fine if you’ve got a big HR department; it’s not fine if the HR department is you spending a couple of hours each week trying to keep up with all the legislation, the health and safety, the immigration, the fair pay agreements.

This is putting another burden on employers to be able to have time to keep up with this, as well as running their business—which is what we want them to be doing—but, also, them having faith in the authority taking into account whether they were unwittingly or knowingly breaching the obligations. And I was interested to see, too—and it’s an area that we canvassed earlier about the privacy issues around the information that the unions will hold on employees—that there doesn’t seem to be any reference to penalties on the unions perhaps breaching obligations that they have, of using the information and what might happen if they use it in an inappropriate manner, or whether they are lax with their security on the information. So I think that’s a whole area, Minister, that seems to be missing, but perhaps it is implicit here, and perhaps you can clarify that for us. Thank you.

I accept from the member’s comments that she does not support the legislation as a whole and believes that it imposes a regime that she does not think is necessary. But to the extent that the legislation is passed by the House, it is not unreasonable that there are penalties for all parties if those parties are in breach of the law, and that is what this part deals with. I do note that while the focus of the member’s comments were on the effect of penalties on employers who might be in breach of the legislation, in nearly all respects, across the bill, penalties apply equally to all parties who might be in breach of the legislation, including unions and including employees. Specifically in respect of the member’s last question, I can’t recall which part it is in precisely, but I can assure the member that there is indeed a penalty in the legislation if a union improperly uses employee information.

I suppose at the last reply, the Minister did make the point that where I was worried—or, you know, there didn’t appear to be much of a threshold before any employee could lodge a claim under a breach of the fair pay agreement. He points to clause 200, which does the things that the authority must take into account in determining the amount of penalty, and paragraph (c) was “whether the breach was intentional, inadvertent, or negligent …”. Now, I think most people in this House would have some sympathy with some sort of penalty for a breach that was intentional, you know, that an employer went out and intentionally tried to diddle the system and get around and pay less. So, yip, we can understand that. Negligent, if you’re just—well I don’t know what is—well, it comes to the point that the previous National Party speaker, Penny Simmonds, was saying. The Government seems to think that business owners have nothing else to do all day but to sit around studying the latest effusions and emanations from this Parliament as to a hundreds and hundreds of pages of stuff that they’re supposed to keep on top of.

I was driving on the weekend, and once you get out of town, you actually have to pay a hang of a lot of attention because the speed limit keeps changing all the time. It goes from 50 to 60 to 30 to 70 to 80, and then, next minute, it’s 100, and then it’s back down. That’s no excuse if you happen to be going along thinking that you’re in a 100-kilometre zone and it turns out you’re in a 70-kilometre zone. The police officer doesn’t say, “Oh well, yes, you didn’t understand, poor chap.” No. They give you a ticket. That’s the sort of thing—it’s the same notion that we’re dealing with here, not having, sort of, spent the last three weeks studying the legislation, the poor business owner has made a mistake, and it may well, indeed, be inadvertent. But this legislation doesn’t say, “Oh, if it isn’t an inadvertent mistake, there will be no penalty.”; it just says that—well, it implies—it may be slightly less of a penalty if it’s inadvertent than if it was intentional.

If it was negligent, well, tough luck. You’re going to have to pay up because you’re expected to know everything about everything. When it comes to immigration law, when it comes to the rights and responsibilities of all the employment law, when it comes to whether or not you’re fixing up with the Commerce Act, and then not to mention the IRD and whether you’ve done all that right. So there’s so many things to worry about. It is a small wonder that the backbone of our economy, the small entrepreneurs, are starting businesses, taking the risk, having a go, that part of the economy is spluttering at the moment. One of the reasons is because it is so risky and so difficult. I’ll make this point once more, and I won’t make it again I promise, but this legislation is just another example of every week this Parliament passing more legislation—under Labour, with the support of the Greens—to make life more difficult.

CHAIRPERSON (Hon Jacqui Dean): Order! Order! We are considering Part 9, which, on my reading of clauses 196 to 203, is very specific to penalties. I am looking for targeted debate. If members care to stray in to general comments, more in the nature of a third reading speech, then it’s up to them, but I am looking for targeted debate.

I appreciate your admonition, Madam Speaker. The only point is that we’re dealing with the penalties, we’re dealing with the punitive side of the bill and the punitive side of this Government when it comes to businesses that don’t get it perfect when it comes to all the regulations that are passed. That’s the only point I’m making—it’s punitive.

Yes, of course, the Minister will say “Well, if you’re going to pass a bill you need to have penalties to ensure people do that.”, and it’s quite right. But the piece of logic that he’s missing is perhaps you don’t need to pass the bill in the first place in order to pass the penalties. It is the addition of regulation requirements, fish hooks, and potential areas for mistake that inevitably require the penalties; otherwise there’s no point. So, yes, you’ve got to have the penalties—but do we need to have the whole rigmarole that leads to the penalties in the first place? And that’s where I would’ve thought a very good guiding principle for any Government should be regulatory restraint.

The first question that any good Minister should ask when a proposal is put in front of him or her by enthusiastic party members, by officials, by people coming up with bright ideas, is: is this really necessary? Is it really going to make it easier for people to make a living?

In as far as the member’s comments relate to the penalties covered in this part of the bill, again I draw the member’s attention to clause 200, which provides clear guidance to the authority to adopt a reasonable approach to any party, be it an employer, a union, an individual employee, who does end up in that situation, the authority is guided to consider whether the breach was intentional, inadvertent, or negligent, and a range of other factors. Bearing in mind this process will usually unfold after lower-level dispute resolution processes have already played out, which is usually where things actually get resolved before they get to the authority.

Furthermore, I note that the wording in clause 200 is almost a direct lift from the wording in clause 133A of the Employment Relations Act, which has been in place for the best part of 20 years, and, I think, has, generally speaking, provided pretty good guidance to the Employment Relations Authority to act in a proportionate way in these matters.

I move, That the question be now put.

Not quite yet. I will say to the House, while it’s not the longest part, it is a substantial part of the bill, but thank you. I am looking for targeted interventions.

Thank you, Madam Chair. I’d just like clarification on what the Minister talked about before with regards to the union getting membership through maybe offering to pay union fees or something along those lines or sending them letters. Can you confirm if that’s OK for the union but if an employer, say, might have a philosophical reason for not wanting unions involved, said to an employee, “No need for you to join the union, we’ll all be good. That’s all OK and don’t bother.” Can you confirm one is OK—the union it’s OK for them—but it’s not OK for the employer? I just want to seek clarification if that’s the intent.

I can confirm that the provisions relating to undue influence were covered off in the debate in Part 3. We had a good debate on that. And as far as if any party breaches those, then there potentially is application in Part 9 for a penalty.

Thank you, Madam Chair. I wonder if the Minister could talk to us a little bit more about the penalties and whether they are cumulative or whether, if there is a fair pay agreement being negotiated and the employer misses several obligations in that, that is counted as one, or whether that will be cumulative, as in non-compliance or breaching, or whether it’s going to be each time there is a fair pay agreement being negotiated—whether you can be penalised more than once during that time?

I’m thinking of some poor employer who’s having a particularly difficult time with their small business: they’ve lost a number of staff, they’ve had some personal issues with death in the family, and they might have missed the whole process, or they might have missed part of the process—just how would the penalty system work? Do you get one breach because you’ve missed everything, or are you going to get some sort of cumulative $20,000 for missing this deadline and $20,000 for missing not letting your employees know about something—just how would it work? It doesn’t seem to have that level of detail here.

You can imagine, in a small-business situation, where there could be quite a lot going wrong for that business at one time—they might have lost a big contract; as I said, they might have had a family bereavement; they might have lost some particularly critical staff—all of a sudden, they realise they’ve missed a whole lot of obligations and they don’t know where they’re going to be with this: whether they are going to be hit with a whole series of breaches or whether there is some way in which they can put their hands up and say, “I’ve got this wrong. Things were going badly for me in my business at this time.” I think it does make a big difference, in terms of how willing people are to put their hands up and admit where they’ve got something wrong—if they think there’s going to be a reasonableness around how they’re going to be treated—but not if they feel that there won’t be any ability, I guess, to negotiate the situation they were in and ask for some way forward in terms of trying to catch up with meeting their obligations without being hit with penalty after penalty after penalty.

Then, in terms of the recovery of the penalties, I was trying to look and find where there might be some ability for someone who’s founded a business who has found themselves in that situation where this could be the brink for them if they find they’ve got a penalty of $20,000, or maybe more than one of $20,000—just is there some ability for employers to be negotiating how the recovery of these penalties might occur? I can’t see anything in here that gives an indication that there will be any leniency. There’s a little bit about penalty by instalments, but that’s only if the financial position of the person paying the penalty requires it, which actually then means the employer has to divulge quite a lot of commercially sensitive information about their financial situation.

So I am just interested to know how this might be handled, in terms of whether the penalties can be cumulative; whether it’s one set of penalties only per negotiations that occur; and what level of flexibility around the recovery of those penalties there might be. Thank you, Madam Chair.

In the employment relations system, disputes about the breaches of parties are generally dealt with at the lowest level possible. Usually this occurs through direct engagement between the parties in the first instance. That might occur at the bargaining table. It might also occur with the assistance of mediation. It is generally only after there have been significant other efforts to resolve those issues at a lower level that they might advance to the authority, where these penalties take effect.

In response to the member’s specific question about whether there could be multiple penalties, the answer, in theory, is yes. Any enforcement action will be considered on the basis of the facts that come before the authority. So, if a person breaches an obligation at a certain point in the process, it is possible that a further breach could occur later, and they will need to be accountable for that. I know that clause 201(2) in particular enables a claim for two or more penalties against the same person to be joined in the same action. And again I note this applies to anyone who is engaged in the process, not just employers.

I also note two things in respect to the reasonableness. I’ve spoken at some length on a couple of occasions about the fact that clause 200 specifically provides the guidance about the authority acting in a reasonable and proportionate way. That is exactly how the authority sets penalties under the existing Employment Relations Act, which has been in place for over 20 years. So it’s, effectively, the same framework that will apply here. I also note that the financial penalties listed in the bill are maximums; they are not set penalties for particular offences, and that’s where the proportionality that is allowed under clause 200 comes into effect.

Thank you, Madam Chair. I almost lost my bit there—anyway, that was lucky. So, on clause 196, I was reading through this and it says “Penalty for non-compliance with obligation when bargaining”, and I thought to myself, hold on a minute, are you actually subjected to potential penalties when bargaining—so when you’re not actually a party to the agreement? If you are, that raises concerns—so that’s just a direct question there, Minister. Under clause 196, it looks as if you are open to be penalised—is that the case?—during the bargaining process, when you’re not yet a party to it and you’ve been forced into it.

I was also quite curious around the penalties for clauses 196 and 197, because for clause 196, when you’re not actually a party to it, the penalties are higher there than they are when the fair pay agreement is in force. Is that an effort just to push people into it, and why is there that inconsistency? I would have thought that the penalties under the so-called fair pay agreement would occur when it’s actually in force. I thought that they would be higher than when it’s not in force. So those are my two specific questions in relation to that.

It is correct that obligations apply to parties right throughout the process from the point of initiation, and it’s a basic and not novel principle in law that when obligations apply to parties and those parties do not meet those obligations to the detriment of others, there can be penalties in place to encourage compliance. So, yes, the member is correct in observing that enforcement and penalties can and do apply during bargaining.

Then, in respect of his question about the fact that the penalties are, in fact, slightly higher during the bargaining period, that is correct. That is because the impact of any party breaching their obligations—perhaps their good-faith obligations—during the bargaining period actually might have a more serious and profound impact because it potentially disrupts the bargaining process, which affects wide range of parties, versus a breach of an obligation once an agreement is in place, which is probably actually likely to affect a smaller number of parties in those particular circumstances.

I move, That the question be now put.

Thank you very much, Madam Chair. Sometimes when you’re sitting down the back, you wonder whether—well, you take these opportunities when they come, and I’m looking forward to asking three questions in particular about this bill. It’s been hard to get a word in from this side. We’ve got a lot of contribution.

But it’s interesting, in clause 201 that the Minister referred to previously when he was referring to the enforcement action—the question I have for the Minister in regards to that is: what, if any, assessments of cost have been undertaken in regards to the enforcement action that will flow as a result of clause 201? I had a quick skim of the departmental disclosure statement and also a quick skim of the regulatory impact statement—particularly the regulatory impact statement, I think, is probably the most relevant. I didn’t see anything there in regards to the costs in regards to enforcement, which—maybe I missed it, but I’m pretty reasonable at reviewing; I didn’t see it. So just a question there in regards to what the quantum of it could be.

The second point that I raise is in regards to clause 197(2), and this is in regards to the differentiation between the penalty for the individual and the penalty for the other person. The question that I have for the Minister is in regards to the process that’s been undertaken in regards to the setting of those two different penalty levels. I’m assuming the “other person” categorisation refers to businesses, which makes sense. I know that there is some potential precedent in regards to that in other aspects of employment legislation, but I’m just seeking clarity in regards to the basis on which “other person” was set at $20,000 versus “individual” at $10,000, and what consideration around ensuring that that was appropriate and consistent was undertaken.

And the last question, if I may, relates to more of a macro question around Part 9, “Penalties and enforcement”, and, in particular, what engagement, if any, has been undertaken with the Ministry of Justice in regards to these provisions. I’m just looking for a little bit more detail in regards to the dialogue that has occurred—which I assume has occurred—in regards to assuring the appropriateness of these clauses, and, in particular, any issues that were raised through that dialogue with the Ministry of Justice in terms of actions that potentially resulted in any changes or highlighted areas of risk that came as a result of that engagement process. So those are the three questions I’ve got, and I look forward to the Minister’s response.

In response to the member’s first question about there being an assessment of the overall system-level impact of enforcement and penalties, it’s very difficult to assess what the nature of non-compliance might be at a system level, but I would expect its overall impact will, in fact, be very low. If we look, broadly speaking, at the level of non-compliance that makes its way through to enforcement and penalties being issued across the entire Employment Relations Act 2000 (ERA) regime, it’s actually very low year to year, so I do not expect there would be any significant impact, but it’s very difficult to tell exactly what it would be.

In respect of clause 197(2), which identifies the difference in a penalty between an individual and any other person, “any other person”, yes, would include businesses, but also unions and any other corporate organisation, including employer associations that are within the ambit of the legislation. The $10,000 and $20,000 figures for those groups, respectively, are just taken straight from the Employment Relations Act. As we have in many parts of the legislative design, we’ve tried to keep as much consistency with the broader employment relations system. Those penalty figures, as far as I can recall, have been in place since the early days of the ERA, back in the early 2000s.

In terms of engagement with the Ministry of Justice in respect of Part 9, “Enforcement and penalties”, the Ministry of Justice, of course, is involved in the overall New Zealand Bill of Rights Act compliance vet with the legislation. They do always look at these matters, including the appropriateness and proportionality of penalties, and I do not believe that they had any particular comment to offer in respect to the penalties in this legislation.

I move, That the question be now put.