Fair Pay Agreements Bill (FPA’s): The Most Significant Employment Law Changes In More Than Twenty Years

April 4th, 2022 - Barbara Buckett

Understanding these changes is important for employers and employees as it moves to establish a rigid framework for compulsory bargaining.  

This bill seeks to provide a framework for collective bargaining for fair pay agreements across entire industries or occupations, not than just between unions and particular employers.

Should you wish to read the proposed changes introduced on 29th March -view them here.

Key parts of the Bill are:

  • Eligible Unions can initiate bargaining for a FPA agreement 

  • The threshold for entry into FPA bargaining as an eligible union is 1000 employee or 10% of those intended to be covered by the FPA

  • The bill also introduces a “public interest test” which gives access to the FPA system where there are systemic employment issues in the industry sector such as low bargaining power lack of pay progression long hours and contractual uncertainty.

  • The Chief Executive of the MBIE will approve eligibility of the representation bargaining rights. 

  • The bill provides for employer default parties who will be listed in as schedule to the act and will be able to step in at the bargaining table where there is no employer bargaining party. Default employer parties will be the most representative employer entity in New Zealand. This will most likely be Business NZ. 

  • There are separate good faith obligations on the negotiating parties like those in the main body of the act.

  • The Bill provides a template list of what must be included in the FPA as a minimum ie. Legal start and expiry date, normal hours of work, minimum base rate (including how they are to be adjusted), overtime, penalty rates, superannuation (if any) leave entitlements.

  • It requires certain bargaining topis for inclusion such as health and safety.  

  • The FPA must also expressly include reference to any applicable governance arrangements for each party and the process for the applicable bargaining engagement

  • The bill includes provision for dispute resolution based on the existing one in the act for when negotiations stall or fail to be ratified.

  • If the matter cannot be resolved by dispute resolution, then either party can apply to the employment relations for to impose an outcome by determination.

  • The final FPA (whether by agreement or determination) is to be submitted to the employment relations authority for a “compliance assessment” and approval by the authority. Once approved it then goes to a ratification process. If both parties to the bargaining ratify then it will move to a verification exercise (a check that the FPA is legally compliant) the by the Chief executive of MBIE.

  • Once verified the Chief executive of MBIE will validate the terms of the FPA in the form of secondary legislation and it will the terms and conditions within the FPA will be enforceable by law. It will apply to all employees specified within the coverage part of the FPA.  

This is the most significant amendment to the employment relations act since its inception in 2000.

The basic concept before the detail was announced today had already drawn severe criticism from an anxious business sector.  

However, the bill goes much further than the early signals from government as to what it was proposing.

It envisages an entirely new section within the current act and returns Unions to their former role in employment bargaining.      

It is modelled on the Australian Fair Pay system which is materially different form the New Zealand system of bargaining and pay systems. It is highly unionised with a collective bargaining infrastructure which NZ dismantled with the employment contracts act in 1991. 

Not only is it bound to be a political magnet it will provide a minefield for dispute. interpretation and application. 

It will require specialist negotiators to find the way through the proposed framework, adding cost to an already overladen compliance regime for individual small business owners.

Regulation only breeds legal arguments and disputes

Whilst there is no doubt there are pockets of huge inequities in the pay systems in employment that need to be addressed these are not necessarily indicative of most workplaces.

Whilst slave labour and undervaluation of workers is anathema to fair working conditions this could arguably be a backwards step in a modern economy moving forward looking for a modern equivalent employment law framework not one dredged up from the past.

Grafting an Australian system onto a totally different employment infrastructure does seem to signal structural issues from the outset.   

However, is this the panacea for fair pay or just an old-fashioned band aid. 

Will it produce fairness and benefits across the board including more jobs, flexible working arrangements and increase productivity which NZ lags in?   

Whilst it will entrench pay rates caught in a rigid pay structure. It is counterintuitive to flexibility which a rapidly fast-moving modern workplace demands which has been thrust on us by Covid-19 and advanced technologies.         

Currently the Bill is going through the select committee stages. Any person or organisations with concerns should make submissions to the select committee. This is a significant piece of employment legislation.

Also read our post about the upcoming changes to the Holidays Act 2022.


Please contact Buckett Law for advice and assistance on how this effects you.

Note: BuckettLaw takes no responsibility for the consequences of any actions taken on the basis of our articles. Any views expressed or comments made in an article are the writers option only. The content in our articles does not constitute legal advice. If you need legal or expert advice you should obtain specific advice about your case or matter from a professional. For legal advice based on your individual situation please contact us to speak with one of our expert lawyers.

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Barbara Buckett

Barbara Buckett is a highly experienced senior employment lawyer with over 35 years of practice in New Zealand. She provides expert advice on all areas of employment law and has a proven track record of delivering excellent results for clients. Barbara has extensive experience in resolving workplace issues and is an experienced litigator. In her free time, she enjoys reading, traveling, working out, and fine wine and dining with friends.

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