What is a Fair Pay Agreement?

Fair Pay Agreements are a new part of New Zealand’s employment law that are being proposed by the current Labour Government. They will set some minimum standards of employment for everyone working in a whole sector or occupation. They will be negotiated between working people (in union) and employers in a sector. Employees and employers will get to vote on them, but if the sides can’t agree, a third party will step in and set the new rules.

Fair Pay Agreements will definitely improve fairness, but they are not just about pay, and they are not a full employment agreement.

While pay is one of the things that must be covered by a Fair Pay Agreement, it’s not the only thing. They can also cover important issues like training, leave and health and safety.

Equally, a Fair Pay Agreement will not be a contract between an employer and an employee, like an employment agreement. It will be more like a law, that sets minimum rules for all the agreements in a sector or an occupation, like sick leave in the Holidays Act or the minimum wage.

So, if a Fair Pay Agreement is agreed in a sector you work in, you won’t get a whole new employment agreement. But whatever employment agreement you have – individual or collective – it will have to have the same or better than what’s listed in the Fair Pay Agreement. If it doesn’t already, your employment agreement would be updated to meet those terms.

What is the Process to Get a Fair Pay Agreement?

So how will Fair Pay Agreements happen? The Minister of Workplace Relations, Michael Wood, hasn’t released his new draft law yet. But, based on what he has said, there are some things we do already know and there are five key steps.

Initiation

To start the process for a Fair Pay Agreement a union will have the agreement of 1,000 employees in a sector (or 10% of all the employees in a sector – whichever is lower). This marks the start of the Fair Pay Agreement process. It is worth noting that, once it has started, the process must result in a Fair Pay Agreement.

Representation

Next all the employers in the sector will be told that the process for a Fair Pay Agreement has started. Those employers will ask all their employees to agree to have some contact information shared with the union or unions who started the FPA process. For those that agree, unions will contact them, seek their view on what they want to see in a Fair Pay Agreement and invite them to meetings with other workers to talk about the Fair Pay Agreement.

Bargaining

All the employers will come together to form one bargaining side. All the employees, through their unions, will come together to form the other. The law will require both sides to also show how they are specifically considering the interests of Māori. Then the two sides will negotiate about what they think should be in the Fair Pay Agreement. There will be some topics that are mandatory to agree and some that are only mandatory to discuss. But it is possible to agree anything in a Fair Pay Agreement.

Ratification

Once the two bargaining sides (employees and employers) think they have reached an agreement, everyone in the sector gets to vote on it. To be passed, the Fair Pay Agreement must be agreed by 50% +1 of employees, and the same for employers. For employees it is one person one vote. For employers, their votes are determined by the number of people they employ in the sector with a slight weighting in favour of small employers with less the 20 staff getting a bit more than one vote per employee.

If the Fair Pay Agreement is passed by both sides – employers and employees – then it is a done deal. If it is not passed by either side (or both), they go back and have another go at negotiating to try to find something that will work better. Then in gets put to the vote again.

Determination

If a Fair Pay Agreement doesn’t pass a second time, then it goes to determination. (At the initiation stage we noted that once a Fair Pay Agreement process starts, it must end in a Fair Pay Agreement). In determination it will be the job of the Employment Relations Authority to decide what should be in the Fair Pay Agreement.

How will a Fair Pay Agreement work?

Fair Pay Agreements will be like a type of law. A Fair Pay Agreement will not provide all the details that make up your employment agreement. But you will know that any employment agreement you are ever asked to sign in that sector or occupation will have to include at least as good as the Fair Pay Agreement. And you will know everyone else who is working in that sector or occupation is getting at least the same as well.

If you find you aren’t getting what is in the Fair Pay Agreement you will be able to raise it with a Labour Inspector. It is also something you will be able to raise as a grievance through mediation and the Employment Relations Authority or a dispute in the Employment Court.

Fair Pay Agreements will apply to all employees – casual, fixed-term or permanent. They will eventually cover some contractors. “Dependant contractor” is a made-up term to describe people who have been made to work as contractors who should be employees. So dependent contractors will be covered by Fair Pay Agreements and the new rules have extra penalties for employers who turn employees into contractors to get out of Fair Pay Agreements.