Fair Pay Agreements Bill introduced to Parliament

The promise of a Fair Pay Agreement (FPA) System was announced as part of the current Labour Government’s pre-election promises and has been on the cards for years. Yesterday we received word that the long-awaited FPA Bill (Bill) was introduced to Parliament.

If you are unsure what the proposed FPA System entails, you can read more in our earlier article here.

The Bill is yet to go through the full Parliamentary process (including three readings in the House of Representatives and referral to a Select Committee) therefore, it is subject to being withdrawn and/or dramatic changes in its terms.

In short, the Bill provides the framework for unions and employers to collectively bargain for FPAs for a specific industry or occupation.

The Bill states that applications to commence bargaining for an FPA must, in the first instance, be made to the Ministry of Business Innovation and Employment (MBIE). MBIE can then invite submissions from the public on the application.

Under the Bill, there are two tests an applying union can meet in order to commence bargaining for an FPA.

The “representation test” is satisfied if:

  • at least 1,000 covered employees support initiating bargaining for the proposed FPA; or
  • 10% of all covered employees support initiating bargaining for the proposed FPA.

The public interest criteria appears to target the most vulnerable employees in society, such as those where minimum employment standards are systemically breached, or there is significant migrant exploitation. The “public interest test” is satisfied if employees within coverage of the proposed FPA:

  • receive low pay for their work; or
  • have little bargaining power in their employment; or
  • have a lack of pay progression in their employment (for example, pay rates only increase to comply with minimum wage requirements); or
  • are not adequately paid, taking into account factors such as—
    • working long or unsocial hours (for example, working weekends, night shifts, or split shifts):
    • contractual uncertainty, including performing short-term seasonal work or working on an intermittent or irregular basis.

In support of an application under the “public interest” test, the applying union can present evidence of the following (this is not an exhaustive list):

  • the coverage of the proposed FPA includes a high proportion of migrant employees;
  • there is systemic exploitation of migrant workers who are or would be covered employees;
  • most of the covered employees are employed on a temporary basis;
  • there is systemic failure to comply with minimum employment standards for the covered employees;
  • a high proportion of the covered employees are employed by small-to-medium-sized employers (meaning the employer employs less than 20 employees at the beginning of the day the application is made to MBIE); and
  • there is systemic health and safety issues for the covered employees.

The Bill is lengthy (some 244 sections) and covers the process for bargaining and ratifying an FPA, as well as what must be covered and discussed for a proposed FPA (surprisingly, this also includes a mandatory discussion on flexible working arrangements, perhaps a topic brought about due to the COVID-19 lockdowns). We will continue to analyse this Bill and provide further updates as it progresses through Parliament.

Click here for more Employment Law articles.

Meet the team that makes
things simple.

Alex Beal