NZALPA Solicitor John Hall takes a close look at a discussion paper on designing a fair pay agreement system and a consultation document on how to address temporary migrant worker exploitation – both recently published by the Ministry of Business, Innovation and Employment (MBIE).

Fair Pay Agreement System

Last year the Productivity Commission identified a problem with capital intensity and labour productivity in New Zealand. Growth has been driven by an expanding labour market more than by innovation, investment or trade. This may mean that workers are getting a reduced share of the value of their work. The Fair Pay Agreement (FPA) System is the tool the Government proposes to fix this concern. 

The FPA system would enable a certain number of workers in an industry to decide to begin negotiations to set wage and other employment standards to apply to employers across that industry. It is not yet clear how an industry would be defined or what number or proportion of workers in the industry would be needed to initiate the process. 

It is likely that each industry FPA will bind all employers in the relevant industry, so employees wishing to initiate an FPA process may have to prove that an FPA is necessary and in the public interest. 

Employees will be represented by trade unions at negotiations but there is some discussion about allowing other groups to participate in negotiations as well. For example, there is also a proposal to allow for regional FPAs and in such circumstances local government might have something to say. 

To deal with the increased burden on trade unions the Government proposes expanding MBIE bargaining services and allowing the Council of Trade Unions (the CTU) to have a role in all bargaining. It may also be possible for bargaining that has failed to be referred to the Employment Relations Authority (ERA) for binding resolution. 

Curiously, it is also proposed that each FPA should satisfy a market impact test. The purposes of the proposed test include preventing employers using the FPA process to put small employers out of business, ensuring FPAs take account of regional labour market differences, preventing parties from including clauses that would be overly burdensome on business and be a factor for the ERA to consider when resolving bargaining deadlock. It is not yet known whether the outcome of the market impact test will be subject to appeal in the courts or judicial review. It is also not yet clear which authority will assess the test, what its scope will be, what the test itself will be of, what the standard of proof will be or who will be heard in argument on it.

It is encouraging to see the Government facilitating practices that will standardise business practice across industries. However, I believe the FPA proposal is overly complicated. The proposed market impact test may be cumbersome and burdened by too many contributing purposes. It is also likely that a public interest test will not always be the best method of identifying whether an industry should begin an FPA process. Finally, while increasing productivity is the ostensible motivation for the policy there does not seem to be much in the way of encouraging bargaining to prioritise or stimulate organised investment in human capital. Overall, the proposal may be overly complicated and open to litigation and dispute in areas that are not necessarily helpful to employees. 

Read more about capital intensity and labour productivity in New Zealand HERE.

Temporary Migrant Worker Exploitation Review 

The Government has also identified that migrant exploitation is having a distortionary effect on competition as well as damaging New Zealand’s international reputation. 

The proposed solution is a multifaceted approach including changes to immigration procedures and the employment law regulatory regime as well as an 0800 number for reporting migrant exploitation. It also proposes that employment law liability be expanded to include anyone with significant control over a business and includes measures to extend employment rights to subcontracting, labour hire and franchising situations. 

Admirable as these proposals are, I believe they do not go far enough to enhance migrant education about New Zealand legal conditions and employment practices. Job market education is particularly important in the light of the significant skills mismatch identified by the Productivity Commission. 

Both MBIE proposals are moves in the right direction but it remains to be seen whether either can achieve their objectives without a stronger focus on human capital investment. 

Read more about migrant exploitation HERE.

Consultation on both of these topics closes while Uplink is at the printers, so we look forward to the next developments on both of these issues.