Rob Towner: Grounds to worry over work bill

COMMENT

Employers are already expressing serious concerns about the Employment Relations Law Reform Bill, which the Government introduced into the House last week.

Although Council of Trade Unions president Ross Wilson said he expected it to be a "fine tuning" of the ERA, the bill - which with its explanatory note runs to 103 pages - is an overhaul of employment law in New Zealand.

Few employers would agree with the Government's claim that the bill's provisions "support innovation, productivity and workforce skill development".

The reason for this is apparent when one discerns the major themes that characterise the proposed changes: increased intervention by the state in labour relations; a more prescriptive approach to employment law; moves towards a more centralised labour system, including the possibility of third-party determination of employment terms and conditions; increased union power and influence; and a desire to collectivise the workforce.

These characteristics are evidenced in the following areas.

GOOD-FAITH BARGAINING

The bill requires a union and an employer involved in bargaining to conclude a collective agreement, unless there is a genuine reason not to. If enacted, this would be a significant change from the present law which, although requiring unions and employers to properly consider and respond to claims from the other side, does not compel them to enter into a collective agreement.

The bill also contains a "banging heads" provision that requires a union and an employer to "continue to bargain" about unresolved matters even though they have come to a standstill or reached a deadlock.

Further, a union that is not making progress in obtaining a collective agreement or renewing one on terms acceptable to it will be able to refer the bargaining to the Employment Relations Authority for "facilitation".

There are several grounds on which the authority can accept a reference for facilitation, including alleged serious breaches of good faith, and that the bargaining has been "unduly protracted" and efforts made to resolve the difficulties have failed.

The authority may make recommendations (and, importantly, give "public notice" of its recommendations) about the bargaining process and the provisions the parties should include in the collective agreement.

In other words, although an employer may have genuine reasons for not agreeing to a collective agreement (for example, few union members or unreasonable claims), persistence by a union which represented only a proportion of the workforce could result in recommendations from the authority that the employer agree to a collective agreement and the provisions that should be included in such an agreement.

Equally worrying for employers will be the risk that the authority is to be given a new power to determine a collective agreement and to fix its provisions if there has been a breach of the duty of good faith in relation to collective bargaining.

Although the grounds for such a remedy are quite narrow and it seems this power of the authority will be one of last resort, nevertheless the possibility of third-party determination of employment terms and conditions is something not seen in this country for several decades.

The effect of such a determination by the authority is to make the collective agreement binding and enforceable on employers. Employers will be obliged to attend at least one meeting in relation to a claim for a multi-employment agreement.

Presumably after that the general good-faith bargaining provisions will require them to stay at the table in negotiation for a multi-employer contract agreement (MECA).

These aspects of the bill reflect a significant change in the nature of good-faith bargaining, which was first introduced in labour legislation in this country in 2000.

In North America, where the principle of good faith in labour relations originated, it has been almost entirely procedural in its nature. In other words, good faith was designed to regulate how the parties dealt with each other in bargaining, and the remedies of the US and Canadian labour boards in cases of breach of good faith have been limited to issues of process.

ALLEGATIONS OF FREELOADING

The bill proposes that it will be a breach of the duty of good faith for an employer to pass on in its individual employment agreements, terms and conditions agreed in collective bargaining, if the employer's actions intend to undermine the collective agreement and have that effect.

This provision could discourage employers who are party to a collective agreement from employing other non-union employees on similar terms and conditions on an individual basis, even if the employer believes those are good terms and conditions that should apply equally to non-union members.

This is because employers will be reluctant to expose themselves to a claim that they have undermined the collective agreement and have to justify their actions to the authority.

CONSTRAINTS ON BUSINESS RESTRUCTURING

The bill contains two provisions which will constrain the ability of employers to restructure their businesses.

First, it proposes continuity of employment for what are identified as vulnerable groups of employees (for example, those involved in cleaning, food or laundry services). If their employer sells the business or the contract changes hands, employees will have the right to elect if they wish to transfer to the new employer, and if so, to do this on the same terms and conditions of employment with continuity of service (but no entitlement to any redundancy compensation).

Of more general application is a proposal that every collective agreement and every individual employment agreement must contain an "employee protection provision". This clause is designed to protect the employment of affected employees if the business is restructuring.

This would include a process that an employer "must follow" in negotiating with the new employer about a restructuring in relation to employment issues.

It will also include the matters relating to employees that the employer must negotiate with the new employer.

This could mean that employers find in future they do not have the freedom to negotiate commercially the most appropriate agreement with a prospective purchaser of their business, because they have already agreed with the union that they would follow a certain process and negotiate certain employment matters with the purchaser.

Existing collective agreements and individual employment agreements will have to be varied within 12 months to comply.

PENALTIES

A disturbing feature of the bill is the extent to which it introduces new penalties into labour relations.

Its numerous references to penalties seem at odds with the objects of the act - to "build productive employment relationships through the promotion of mutual trust and confidence".

* Rob Towner is a partner at law firm Bell Gully.