On 1 December 2022, the Fair Pay Agreements Act (the Act) comes into effect. It will have wide reaching implications, particularly on sectors such as hospitality and other industries which employ seasonal and casual workers. It is important that employers prepare for this change and understand how this significant and complex law will affect them.
A Fair Pay Agreement (FPA) is an agreement that applies to all workers across an industry or occupation, providing sector wide minimum terms and conditions of employment. How the process starts is by a union initiating the bargaining process for a defined group of employees. From there the Act sets out how the process evolves and also what employment terms must be included in an FPA.
An eligible union may initiate bargaining for an FPA if it meets either a representation or public interest test:
The representation test requires 1,000 employees or 10% of the employees who will be covered by the proposed FPA to support the application to initiate bargaining.
The public interest test is met if employees who would be within the coverage of the proposed FPA:
Receive low pay for their work; and
Meet one or more of the following criteria:
Little bargaining power in employment;
A lack of pay progression in employment (e.g. pay only increases with changes to Minimum Pay obligations);
Inadequate pay, taking into account long or unsociable hours, or contractual uncertainty (e.g. seasonal or casual workers).
Bargaining for FPAs is to take place within a framework of good faith obligations and processes. The process is expected to be similar to the traditional collective bargaining parties, but with more parties involved. A finalised FPA will apply to all employers within its coverage, regardless of whether or not they have participated in bargaining. Employers covered by the FPA must then provide the minimum employment terms set out to the covered employees. The implications of this are that if you have a business that is covered by an FPA you will be required to provide terms of employment as provided for in the FPA (such as normal hours of work, leave entitlements and minimum base rates, overtime and penalty rates), even if you did not agree to this.
It is important that employers in industries that may be affected (such as hospitality, retail, and cleaning services) are familiar with how the Act could impact them and kept informed. Employers also need to consider important aspects to planning and managing bargaining, including: what key employers will be party to negotiations; how confidentiality will be managed; who will be on the employers’ bargaining team; what are the pay and conditions within the sector and likely benchmarks; how the costs and disruption of bargaining will be managed; how possible new FPA terms will be budgeted for.
For any further information and advice on Fair Pay Agreements or other employment law queries, please contact Jaime Lomas – jaime@dtilawyers.co.nz
