In this article we will outline two legislative developments in employment relations in New Zealand – the Protected Disclosures (Protection of Whistleblowers) Act 2022 (“PDA”) and the Fair Pay Agreement Act 2022 (“FPAA”).
Protected Disclosures (Protection of Whistleblowers) Act 2022
The PDA was enacted and came into effect from 1 July 2022. It amends and updates the original Protected Disclosures Act 2000. The new Act aims to provide greater clarity and protection to a whistleblower, and to streamline the disclosure process.
In short, the PDA clarifies the meaning of ‘serious wrongdoing’, enables disclosers to report ‘serious wrongdoing’ directly to an appropriate external authority, strengthens protections for disclosers, and outlines what organisations who receive a disclosure should do.
The scope of ‘serious wrongdoing’ has been extended to include:
- unlawful, corrupt, or irregular use of public funds or public resources, irrespective of whether the organisation is public or private;
- oppressive conduct, unlawful discriminatory conduct, gross mismanagement or grossly negligent conduct by a public sector organisation or by those performing a function or duty or exercising powers on behalf of a public sector organisation or the NZ Government; and
- conduct in (or by) any organisation that is a serious risk to the health or safety of any individual.
A central change in the PDA is to allow disclosers to report ‘serious wrongdoing’ directly to an appropriate external authority, rather than having to exhaust an organisation’s internal procedures. The new Act also sets out a useful schedule for potential disclosers to know which external authority may be appropriate, depending on the nature of their disclosure.
The new PDA also provides greater guidance to those who receive protected disclosures. In particular, the receiver ought to acknowledge receipt to the discloser, consider if the disclosure warrants investigation, and deal with the matter within 20 working days, unless it is impracticable. The receiver should also tell the discloser what they have done, how they will deal with the matter, and provide reason(s) for their decision – including if the receiver decides that no action is required in respect of a disclosure.
The Employment Relations Act has also been amended from 1 July 2022 to provide for the ability to raise a personal grievance where an employer has retaliated, or threatened to retaliate, against an employee because s/he intends to make or has made a protected disclosure. Further, the burden of proof will be on the employer to prove that the disclosure was not a substantial reason for the employer’s actions.
All employers need to be aware of the new PDA provisions. For any organisation that has a policy on protected disclosures (or whistleblowing), the policy may need to be updated to reflect the changes in the new PDA. This includes the amended definition of ‘serious wrongdoing’ and allowing for immediate disclosure to an appropriate external authority.
Fair Pay Agreement Act 2022
The Fair Pay Agreement Act 2022 (“FPAA”) was enacted and came into force in December 2022. This Act represents a significant change to New Zealand’s employment relations landscape. In particular, the FPAA is aimed to set up a regime which provides for:
- representative bargaining between employers and unions across an entire industry or occupation – this is contrasted with and in addition to the present system of enterprise bargaining provided under the Employment Relations Act; and
- minimum employment terms and conditions for all employees in entire occupations or industries – this is contrasted with the present system in which employers are bound by the terms and conditions it has negotiated for and agreed to, either in an individual agreement with an employee or in a collective agreement with a union.
It is noted that the FPAA bargaining is not intended to displace any collective bargaining that takes place at an enterprise level. Any FPAA instrument will be applicable in addition to any enterprise collective agreements agreed under the Employment Relations Act.
To date the passage of the FPAA has been highly controversial, and the opposition (both National and ACT) has committed to repeal the FPAA if they succeed in the next general election, which is scheduled to take place in October 2023.
In short, the FPAA sets up a legal framework designed to facilitate industry and occupation based bargaining of minimum employment terms and conditions for all employees within the applicable industry or occupation. In the absence of agreement between the employer representative and union representative on the terms and conditions, the FPAA will enable the terms and conditions to be fixed by a member of the Employment Relations Authority, which has been an investigative and judicial body (i.e. it is not an elected body).
In other words, employers and employees in an entire industry or occupation can be bound by the terms and conditions of an instrument produced under the FPAA, if they come within the coverage clause of the particular instrument. They could be bound even if they:
- did not participate in the negotiation or ratification of the terms and conditions;
- were not aware and did not receive notice of the FPAA bargaining at the time;
- consider that the representative body has not bargained or pressed sufficiently for their position or interest, or that the representative body has preferred the position or interest of other parties that the body also represents in the bargaining process;
- oppose the terms and conditions in the instrument, or may not be in a position to fund or meet the outcome of the representative bargaining process; or
- became an employer or employee within the coverage of the instrument after the bargaining process had concluded and the instrument had been established.
Bargaining process under the FPAA
To initiate the FPAA bargaining process, a union must make an application to the Ministry for Business, Innovation and Employment (“MBIE”). The application has to meet the ‘representation test’ or the ‘public interest test’. The ‘representation test’ is met if the union can demonstrate initiation is supported by at least 1,000 employees who would be covered by the proposed instrument, or by at least 10% of all employees who would be covered by the proposed instrument. The public interest test is met if MBIE is satisfied that a portion of the covered workforce receive low pay and have any of the following: little bargaining power; lack of pay progression; long or unsocial hours; contractual uncertainty.
The initiating union will also be responsible for setting the proposed coverage of the FPAA instrument. Coverage can be described in terms of the occupation or industry. While it is required for the coverage to be specified with sufficient clarity, in some circumstances it will be difficult to determine if an employee (and their employer) falls within the coverage of a FPAA instrument. That said, if MBIE is satisfied that the initiation requirements have been met, it will issue a public notice approving the application to initiate bargaining.
After an application to initiate bargaining has been approved by MBIE, there is an obligation to identify and notify the employers who would fall within the proposed coverage of the FPAA instrument. Those employers have to:
- within 15 working days, identify its employees who would fall under the proposed coverage, and notify any unions that have members who would fall within the proposed coverage of the initiated FPAA bargaining; and
- within 30 working days, provide to the applicable employees a written statement which deals with the provision of the employees’ contact details to the initiating union. The employer must allow 20 working days for any employees to advise that they do not want their contact details to be provided to the initiating union. After this opt-out period has passed, the employer then has 10 working days to provide the contact details of all other applicable employees to the initiating union; and
- within 3 months, make arrangements to establish the employers’ ‘bargaining side’.
Forming a bargaining side
The employer ‘bargaining side’ could be an employer association or a multi-employer bargaining side. The employer ‘bargaining side’ needs to agree on an “inter-party side agreement” and to appoint a lead advocate/ spokesperson. If there is no specified employer bargaining party, and the applicable employers cannot agree on a ‘bargaining side’, a sole employer can apply to be the “default” bargaining party.
Employers who band together to form an employer ‘bargaining side’ will need to consider (as part of the “inter-party side agreement”) how their varied interests will be represented. For example, employers would need to consider how they appoint a lead advocate, how any confidential information and conflicts of interest need to be handled, and how advocacy fees would be incurred and shared or apportioned. As such, there are numerous matters and differences for employers to negotiate before the bargaining with the unions begin.
Bargaining for FPAA instruments
Good faith obligations apply to the employer and union parties during the bargaining process. There is also a duty to ensure that Māori employees are represented effectively during the FPAA bargaining process, including by seeking and considering feedback from representatives of Māori employees, and considering whether the bargaining side should include a person to represent the interests of Māori employees.
The parties must bargain on the mandatory contents of a FPAA instrument, which includes the coverage, the expiry date, and in relation to each class of employees or each type of work to be covered by the FPAA instrument, the standard hours, the minimum pay rate, any overtime rate, any penalty rate, the leave entitlements, and the arrangements for training and development. Further, the bargaining sides must also discuss if the proposed instrument will specify terms and conditions on health and safety requirements, arrangements relating to flexible working, and arrangements relating to any redundancy.
During the FPAA bargaining, one bargaining side may make a written request for information from the other bargaining side. The request needs to be met by providing the requested information to the requesting party or to an independent reviewer that is appointed by mutual agreement of both ‘bargaining sides’.
When differences or impasses arise during bargaining, the parties can use the assistance of mediation services or bargaining support services. However, unlike enterprise bargaining under the Employment Relations Act, strikes and lockouts are not lawful under the FPAA.
Concluding a FPAA instrument
When bargaining for a proposed instrument is completed, the instrument has to be submitted to the Employment Relations Authority, which will assess it for compliance with the legislation. The Authority also needs to assess if the proposed instrument overlaps in coverage with any other instruments. If there is an overlap in coverage, the Authority must determine which instrument offers better terms overall, and MBIE will then require the coverage of the ‘less favourable’ instrument be amended to remove the overlap in coverage, so that the applicable employees are only covered by the instrument with more favourable terms.
After the ER Authority has assessed and approved the terms and conditions of the proposed instrument, the bargaining sides must arrange for a ratification vote to be held within 40 working days. Two ratification votes are conducted, one for the covered employees, and one for the covered employers. If the results of both votes are in favour of ratification (by a majority of more than 50%), the instrument will be verified by MBIE.
During the first voting round, if either vote is against ratifying the proposed instrument, the parties would need to continue bargaining. However, if the instrument is not ratified on a second voting round, either of the bargaining sides may apply to the Employment Relations Authority for a determination to fix the terms and conditions of the instrument.
Progress made under the FPAA to date
The FPAA only came into force in December 2022. At this time, it is too early to know how it will work, the difficulties and problems it could encounter in practice, and the outcomes it could produce. We note that a number of unions had indicated that they would initiate bargaining for a FPAA instrument promptly. As of 12 April 2023, four applications to initiate are being assessed by MBIE, and one application has been approved by MBIE to proceed. The four applications to initiate bargaining that are being assessed by MBIE relate to the supermarket and grocery store industry, the hospitality industry, the security guard/officer occupation, and the commercial cleaner occupation.
To date the only application that has been approved to proceed by MBIE relate to the rural, urban and interurban bus transport industry (bus drivers, coach drivers and cleaners). This was approved on 27 March 2023, and the parties will be going through the required notification process and taking steps to form their ‘bargaining side’ (as outlined above).
Lastly, we are aware that unions are actively promoting and signing up employees in order to meet the requirement to initiate bargaining for employees in early childhood centres.
With New Zealand’s general election fast approaching in October 2023, it is unlikely for the bargaining of any FPAA instrument to be concluded prior to the election. As noted above, the fate and future of the FPAA will depend on the results of the election, as it will determine whether the FPAA will be repealed. Therefore, FPAA may be a footnote in NZ’s history, or it may produce binding instruments across entire industries and occupations.
If you need any advice or assistance, we encourage you to contact us.