Paul Tremewan: Pain of new law was not worth the effort

COMMENT

The Employment Relations Act has been in place for three years. Six months after its introduction, I wrote in the Herald that there were obviously a number of teething problems. The act, however, was law and no amount of employer wailing was going to make a jot of difference. It was over to practitioners to get down and make it work.

The question is now, having done that, what difference has the legislation made?

When the legislation was proposed, it was part of a bigger package. There were ACC changes, paid parental leave and other matters that all added to the compliance costs of employing people.

At the time, we wrote to the Prime Minister and the Minister of Labour stating that 13 companies for whom we had been instructed had decided this was all too much of a disincentive to remain in New Zealand. They all moved to Australia. Jobs disappeared and have never been replaced.

One of the aims of the new law was to increase the influence of unions. The stated objectives of the act included acknowledging and addressing the inherent inequality of bargaining power. But Department of Labour statistics show that in March 2001, 17.7 per cent of the total employed labour force was unionised. In March this year, the figure was 17.6 per cent.

Paul Merwood, of the department, says the figure in real numbers is slightly different. In March 2001, there were 331,313 union members; two years later there were 334,044.

All the pain and difficulty associated with the introduction of this new legislation and the return in union membership numbers is less than 1 per cent. Was it worth it?

When the act was passed, union membership was at an all-time low of 17 per cent of the total employed workforce. The Minister of Labour said she did not believe that number would ever be more than about 30 per cent. But there was still real trepidation among employers that the new law would totally unionise all workplaces.

The main plus for unions was right of access to recruit for members, something they could do under the previous law only with the permission of the employer.

This has been a great deal for unions decimated by the previous 10 years. Unions went on recruitment binges. However, this caused problems.

It became relatively easy to convince a worker of the benefits of union membership by way of promised collective agreements and enhanced wages and conditions. But the reality has been much harder to deliver.

Some unions have deliberately cut back on recruitment. They were not able to service such a new influx of members. And, as a consequence, many people joined unions for weeks or months, then left.

There was a real problem in that, except for the major unions such as the Engineering, Printing and Manufacturing Union and the Public Service Association, the unions have not been able to deliver on their promises.

It has also been a great problem for the unions that the act, while requiring parties to bargain in good faith, makes no obligation on either party to enter into a collective agreement. The promises of newly negotiated riches have not materialised, and the number of concluded collective agreements has fallen.

A number of new unions have been created. These are set up and negotiate their collective agreement then go quiet again. This effectively has subverted the act because this was what was happening under the previous legislation - save for the requirement to become a registered union.

The act made much of the obligation of parties to employment relationships to deal in good faith. Indeed, the first major case dealt with this.

Baguley v Coutts Cars went to the Court of Appeal, but once there the court said that all the new legislation did was reinforce the obligations of good faith which pre-existed. In other words the act introduced no novel concepts regarding good faith.

So why were these notions codified in the stated objectives of the act? It seems to be a major factor for all parties - employees, employers and unions - to work together in good faith for the continued employment of members and for the sustained success of the employing enterprise.

The recent AMI v Finsec case was a bit of an aberration. The Chief Judge of the Employment Court observed that unions and employers are viewed as competitors; they are not in any relationship of co-operation. It may very often be precisely the duty or in the interests of unions and employers to undermine each other's interests.

Margaret Wilson, the Minister of Labour, would have to be wondering how far this has put back her campaign for unions, employers and employees to work together for the benefit of all.

Addressing the Employment Law Institute, she said that the Employment Relations Act was implemented to build and maintain productive employment relationships, as part of the Government's broader strategy for a more productive and equitable society and economy.

But has it happened? The economic indicators are all positive, with the economy as robust in the past three years as it has ever been, so there seems to be little to argue about.

But what did the act do? My diploma students over the past three years have been completing assignments gauging the impact of the legislation on their respective businesses. They have been asked whether their employers have encompassed the spirit of the act.

The overwhelming number have found that the act has had no impact whatsoever, other than the requirement to provide all new employees with employment agreements.

Was the loss of employment opportunities justification for that?

The NZ Journal of Industrial Relations has published the findings of a survey of 639 businesses, which showed that only 5 per cent of employers had found the act to have had a positive effect on their businesses. Only 28 per cent said that there was a negative effect. And, as echoed above, 56 per cent said that it had had no impact whatsoever.

In conclusion, the economy is strong and all is well, so let's not change the current legislative environment.

But after three years, one has to ask whether it was all worth it, given the curtailment of employment opportunities, businesses moving overseas and businesses looking increasingly to contract out.

* Paul Tremewan is an employment lawyer and law lecturer at Auckland University.