Are FPAs just about to pay?

In Legal Lines, December 2022 / January 20236 MinutesBy Danielle BestonJanuary 14, 2023

Fair Pay Agreements (FPAs) are a new part of New Zealand’s employment law. The system is designed to bring together employers and unions within a sector to bargain for minimum standards for all employees in that industry or occupation. The FPA system will commence on 1 December 2022 and includes support for bargaining parties to help them navigate the bargaining process and reach an outcome, as well as processes to ensure compliance.

What will it cover?

The rationale behind FPAs is that they will be a way of deciding a fair way to treat working people in a particular industry in terms of pay, hours, health and safety, leave, training and development. For example, that means that following negotiations between unions and employers in that industry, nobody in that industry can be paid less than the rate agreed. By doing so, it is hoped that FPAs will help lift pay and conditions in low-paying industries. Employers and employees will get to vote on issues, but if the sides can’t agree, a third party will step in and set the new rules.

FPAs are different from employment agreements, which are negotiated separately with each employee. FPAs provide minimum standards of employment for everyone within a particular industry. Individual employment contracts must be as good or better than what is agreed upon in your industry’s FPA. Fair Pay Agreements will apply to all employees, whether casual, fixed term or permanent. At this stage, they do not apply to contractors.

The five-step bargaining process

To start the process for an FPA, a union needs the agreement of either 1000 employees in a sector or 10% of all employees (whichever is lower). Alternatively, a union must demonstrate that there is significant public interest in the initiation of the FPA. Once an FPA initiation is approved, the process must result in an FPA.

All the employers in the sector will be informed that an FPA has started. Those employers will ask all their employees to agree to share contact information with the union that started the FPA process. For those employees who agree, the union will contact them and seek their views on what they want to see in an FPA. Unions will also invite employees to meetings to discuss the FPA.

All employers will come together to form a bargaining side. Eligible employer associations can bargain on behalf of employers. All employees, through their union, will come together to form the other bargaining side. The law requires both sides to show how they are considering the interests of Maori. The sides will negotiate what should be in the FPA. Some topics will be mandatory to agree upon, and others are only mandatory to discuss. Which of the two categories a topic falls into has yet to be determined.

Once the bargaining sides have reached an agreement, everyone in the sector will vote on it, including employees who opted out of providing their contact details to a union. To pass, the FPA must get more than 50% support from employees and employers. For employees, it is one vote per person. Employers’ votes are determined by the number of people they employ in a sector. If both sides pass the FPA, the agreement can be made into law provided it is assessed and approved by the Employment Relations Authority. If either side does not pass the FPA, renegotiation takes place, and a second vote is taken.

If an FPA doesn’t pass a second time, then it becomes the responsibility of the Employment Relations Authority to decide what should be in the FPA.

Good faith

The parties must act in good faith towards each other, and specified breaches of the duty of good faith can result in a penalty being applied by the Employment Relations Authority. The obligations that apply between bargaining parties on the different bargaining sides are based on the requirements that apply when bargaining for a collective agreement. These include:

• using their best efforts to set out a process to bargain effectively and efficiently;

• using their best efforts to agree to the terms of the proposed agreement; and

• providing information requested to substantiate claims or responses to claims made during bargaining.

Your rights

If you find you aren’t getting what is in the FPA, you can refer the matter to a labour inspector. It can also be raised through mediation, the Employment Relations Authority or the Employment Court.