Let the FPA battles begin

Roger Partridge
Insights Newsletter
30 September, 2022

Businesses should brace for next week’s return of the Government’s Fair Pay Agreements Bill. The Bill had its first reading in April. It then faced a battering from business groups before the Select Committee in June.

But the smart money is on the Bill returning to parliament largely unchanged. With Labour desperate to deliver on a key 2017 election promise, the Bill looks set to pass into law before Christmas.

Despite the Bill spending five years in gestation, the case for returning to 1970s-style compulsory collective bargaining across entire industries or occupations remains missing in action. Neither the Jim Bolger-led Fair Pay Agreement Working Group nor legions of officials have found convincing arguments for upending New Zealand’s flexible labour market settings.

The folly of the new policy will now have to play out in practice.

The first hurdle will be defining an “industry” or “occupation.” Retail NZ CEO Greg Harford has volunteered his organisation to negotiate with unions on behalf of “retailers.”

But just how many different retail “occupations” or “industries” exist? Is a computer software salesperson in the same occupation as a worker in a fast food outlet? Is a rural farm store or a supermarket in the same “industry” as an upmarket High Street clothing boutique?

Demarcation disputes addressing issues like these have been absent from New Zealand’s industrial relations for three decades. By introducing individual employment agreements in place of sector-wide industrial awards, the Employment Contracts Act 1991 ended this type of productivity-sapping debate. No longer.

Before the ECA, the number of separate industrial awards exceeded 1,900. This is more than 20 times the 97 “occupations” Bolger’s working group identified in its 2018 report. Whether simplistically or deceptively, the working group treated all 107,000 retail “sales assistants and salespersons” as members of a single occupation.

But the larger the group of employees covered by a Fair Pay Agreement, the less workable will be the outcomes for businesses needing terms and conditions tailored to their individual workplaces.

Even by the 1970s, cracks were emerging in the compulsory centralised wage bargaining system that had dominated New Zealand’s industrial relations for most of the 20th century. It was proving insufficiently flexible to cope with the increasing sophistication of the New Zealand economy.

In New Zealand’s more complex 21st-century economy, the one-size-fits-all approach to collective bargaining will be even more unworkable.

You can almost hear the armies of employment lawyers getting ready for battle.

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