News & Thinking

Fair Pay Agreements Act will commence on 1 December 2022

Contributed by:

Anne Wilson

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Anne Wilson

Giuliana Petronelli

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Giuliana Petronelli

Fair Pay Agreements (FPAs) have long been on the government’s workplace agenda as part of their strategy to protect vulnerable employees. The FPA Bill passed through Parliament last week and the new legislation will be effective from 1 December 2022.

In short the legislation allows unions to bargain collectively with employer associations for industry or sector wide minimum employment terms. Unions will represent employees. However, employer associations don’t exist in many sectors and it is hard to see where the resources and capability for these would be found.

The bargaining sides must use best endeavours to represent all those within coverage, including non-members, and to ensure Māori interests and views are effectively represented.

FPAs can be an occupational FPA or an industry FPA. If there is an overlap in coverage between two FPAs, the second one only applies if the workers would be better off overall. The aim is that the most vulnerable employees, often employed in the lowest paid jobs, will be protected by industry wide improved terms. Contractors are not currently included.

These improved terms will not just mean increased wages, as new FPAs must include other terms dealing with ordinary hours, overtime and penalty rates as well. Other matters that must be discussed in bargaining, but do not need to be included as terms, are redundancy compensation, leave and health and safety, which could include wide ranging issues such as bullying and sexual harassment processes, breaks and meal allowances.

Unions initiate the FPA process by meeting a representation threshold of support from 10% or 1000 workers in coverage, or a public interest test. The public interest test will likely be a reasonably low threshold and will consider if the prescribed proportion of employees are “low paid”.  Acceptance has to be by the CE of MBIE.

Sectors that may see FPA bargaining commence soon include hospitality, retail, cleaning, security and early childhood care.

However, the question has been asked whether any union will manage to succeed in securing an FPA before next year’s election.  There are specific timeframes for the various steps that must be followed in the new Act, so unions will not hesitate in gathering the required support. E tū’s website now has a link for workers to sign in support of an FPA if they work in cleaning and security.

There are many possibly delays that can be encountered throughout the process, with the Employment Relations Authority being able to determine if a threshold has been met, whether the coverage of the proposed FPA is defined with sufficient clarity and whether it is already covered by another FPA so we expect it to take months (if not years) for the first FPA to come into force. However, employers should be considering how their interests will be represented in bargaining by their relevant employer organisation or industry body.

If you have any questions about FPAs, including what to do if you receive notice that bargaining for an FPA has been initiated, you can contact the AH employment team for advice.