According to the Government of New Zealand Website, “these Agreements will be a set of occupation and sector-specific minimum employment standards, such as wages, redundancy, or overtime. They will be agreed through bargaining between affected workers and employers, and will then become legal requirements in that sector”.

 On 12 January 2019, the Fair Pay Agreements Working Group (FPAWG), called to provide advice in the design of such a system, recommended that wages and conditions of employment be compulsorily set on a sector, industry or occupational basis.

Such a system would therefore be based on a collective negotiation, where workers will decide when to initiate those agreements, but would subsequently be applicable to all employers and workers within the scope of the agreement irrespective of their willingness to be covered by such arrangements, or their membership of a representative union or employer organisation.

Based on the recommendations of the FPAWG:

• Fair Pay Agreements would cover both employees and dependent contractors;
• Workers would be represented by registered unions during bargaining and only unions would be able to initiate bargaining for a Fair Pay Agreement;
• Concluding an agreement would need over 50% support from workers and over 50% support from employers;
• Once agreed, Fair Pay Agreements would cover all employers in the sector. However regional variations and exemptions of up to 12 months for employers facing severe financial hardship are possible.

However, according to Business New Zealand (BusinessNZ), this system might lead to a system of significant complexity, increase the costs of the process and result in loss of productivity.

Moreover, compliance of such a system with international labour standards and principles is questionable. Since it would breach the principle of free and voluntary negotiation enshrined in article 4 of the Right to Organise and Collective Bargaining Convention of the International Labour Organisation (ILO), 1949 (No. 98), ratified by New Zealand Government in 2003. 

Article 4 of Convention N. 98 is clear on the voluntary nature of collective negotiations: “Measures appropriate to national conditions shall be taken, where necessary, to encourage and promote the full development and utilisation of machinery for voluntary negotiation between employers or employers’ organisations and workers’ organisations, with a view to the regulation of terms and conditions of employment by means of collective agreements”.

It would also be at odd with the ILO’s Committee of Freedom of Association view in a freedom of association case: “A legislative provision that would oblige a party to conclude a contract with another party would be contrary to the principle of free and voluntary negotiations” (Case N. 2460, United States of America, year 2005, paragraph 990).

In order to move forward and avoid any similarity with the obsolete award system of the period 1894-1991, BusinessNZ suggested the government ensuring the voluntary nature of collective agreements and to apply the content of any Fair Pay Agreements only to the negotiating parties in the first instance, with an ability for non-negotiating employers to voluntarily join later.