Collective or individual? Read the fine print

Mum and dad may reminisce about the "good old days" of unionism, but today's employees should think carefully before signing either a collective or individual employment agreement and read the fine print of both, say employment experts.

"There are pros and cons for both types of agreement. Collective bargaining power is positive in that it can put more pressure on an employer than individual bargaining power," says Anthony Drake, an employment lawyer for law firm Bell Gully.

He says employees on a collective doing the same job will tend to get paid the same. However, there is room for good workers to be rewarded within collectives.

Briefly, a collective employment agreement covers the work of a group of people in the same workplace or doing the same work and a union is formed which is deemed to have the relationship with the employer. Only a union can bargain with an employer on behalf of employees on a collective. An individual employment agreement is, at face value, more straightforward - the individual and employer negotiate directly with each other.

Drake says behind the two types of agreement are a number of protective measures for both employer and employee. While employers need to know what they're legally entitled to include in agreements, employees need to know what they can negotiate before signing (see the box below).

"The Employment Relations Act 2000 is more supportive of collective agreements and unions than previous legislation. But if union members decide to withhold labour in a strike movement, an employee can get swept up in that," says Drake.

Siva Mudaly, general manager for manufacturer Alto Plastics which employs 340 people on both collective and individual agreements, says employers can also get swept up and may have to follow collective agreement terms that affect the bottom line.

"If a union and an industry body representing a group of employers agree to a 5 per cent wage increase, all the employers in that industry body have to increase their wages by 5 per cent including those like us that already pay above it," he says.

While unions are again well-supported by law, and collective agreements can work well for employees in big industry and the public sector, people can and do extract themselves from collectives and resign from unions.

Their options include entering into individual employment agreements or staying on the collective agreement but resigning union membership. The latter option often irritates unions. As the only recognised party which can bargain on behalf of collective agreements, employees under collective agreements have to be represented by the union even if they are not union members.

"The union feels these employees are getting a free ride. So if the employee faces disciplinary action, the union won't step in and help them unless they re-join," says Mudaly.

Confusingly, unions can also act for employees who are on individual agreements but join the union anyway. Mudaly says this occurs when an employee wants to use the union as an external negotiator to help them settle individual employment agreement terms with the employer.

"Paying union membership guarantees them cheap legal support if they need it. At the same time, they are not obliged to stop work if a stopwork meeting is planned," he says.

Mudaly says when people move from collective to individual employment agreements it usually involves different work. However, if the work stays the same it's not only unions that can get disgruntled.

"The employees under the collective agreement can get upset. There is usually informal pressure to not resign from the collective and the union," says Mudaly.

Drake says one of the key differences between the two agreements is that employees on a collective have the right to strike.

"Someone on an individual agreement cannot do that. Also, with individual agreements you often have to negotiate on your own behalf and may have to pay for advice."

However, he says the pros of individual agreements include being able to negotiate terms that suit both the employer and the individual.

But no matter what employment agreement you choose there's nothing to stop anyone from approaching their employer asking for a pay rise.

Mudaly says individual employment agreements can be easier for employers.

"Individual agreements give us more influence and control over the terms and conditions. Having said this, we would normally oppose any unique terms and conditions."

Drake says employees need to know that both kinds of agreement are usually open to them (unless there is no collective agreement available anywhere for the kind of work being done) and need a good understanding of their rights in respect of both kinds of agreement. That knowledge becomes even more important if an employer intimidates and pushes the employee to accept one kind of agreement or another.

"While some employers prefer collectives for administration reasons, others would let hell freeze over before they entered into one," says Drake.

Employees also need to know how to negotiate important agreement details such as restraint of trade specifics. Restraint of trade terms govern what happens when the employee leaves the employer - they may not be able to continue to do the same kind of work, use the same customer base, or cover the same area that the employer does.

Drake says a lack of attention to restraint of trade terms is a common cause of disputes, as an employer can seek a restraining order to prevent the ex-employee working in a similar business.

Because New Zealand workers had 10 years of the 1991 Employment Contracts Act, Drake says a "whole generation" of workers knows little about unionism and collective employment agreements.

What to watch for

The term: Is it fixed, indefinite, minimum, or initial? Watch for links between termination for performance, redundancy or misconduct and the term.

Remuneration: Share options, bonuses, base salary, and at-risk pay - how is each calculated and when is it payable? What happens if you leave part-way through the year? Are there links between company performance, individual performance and prevailing market conditions?

Leave: Check details of annual, sick and long-service leave, and time off in lieu.

Restraint Of Trade: What restraints are there around soliciting clients or staff, working for a competitor, accepting other work, and working within a specific geographical area in the future? Is there a duration for the restraint? Is it reasonable?

Termination: Check conditions around warning procedures, appropriate notice periods, right to pay salary in lieu, conflict of interests, incapacity and retirement.

Redundancy: What is the length of notice required, the formula for calculating compensation? Check change of control details and those for technical redundancy and amalgamation clauses. Specifics are important.

Disputes and Personal Grievances: What are the terms and requirements for mediation?

Protection of Intellectual Property: Who retains these rights? What company property must be returned; what happens to inventions and discoveries?