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Employment Relations Law Reform Bill - Q&A

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Hon Margaret Wilson
Minister of Labour

Employment Relations Law Reform Bill

Question and Answer
The objectives of the Employment Relations Act 2000 are to promote good faith behaviour and collective bargaining and provide effective problem resolution services to create and assist more productive employment relationships. Monitoring of the Act has shown there are a number of areas where improvements can be made to better meet these objectives. This Bill makes the required amendments to the Act.

The Bill proposes amendments in the following areas:

Good Faith
Collective Bargaining
Improved Problem Resolution
Protection In Transfer of Employment Situations
Equal Pay
Employment Relations Education Leave

Good Faith

What clarity will the Bill bring to the duty of good faith?

It has been made clear that good faith is a broader concept than the common law obligations of mutual trust and confidence. Good faith includes elements such as responsiveness, communication and support and requires the parties to bargain in good faith over all the issues between them.

Will the duty of good faith apply to individuals as well as collectives?

Yes. It has been made clear that good faith applies equally to individual bargaining and there must be genuine negotiations over proposed individual agreements. This will involve the employer considering and responding to any issues raised by an employee.

What areas of the employer/ employee relationship are subject to good faith?

The duty of good faith covers all areas of the employment relationship.

Will there be more effective remedies for serious and sustained breaches of good faith?

Yes, where a breach of good faith is found to be sufficiently serious and sustained as to significantly undermine collective bargaining, the Employment Relations Authority will be able to fix the terms and conditions of a collective agreement. This remedy will only be available where all other alternatives to reach settlement have been exhausted, and it is the only effective remedy for the party affected by the breach of good faith.

There will also be penalties for serious and sustained breaches of good faith.

Bill References
Clause 6
(1) Clarifies that the duty of good faith is broader than the implied mutual obligations of trust and confidence
(2) Clarifies that good faith applies to individual bargaining
Clause 6(1)
Codifies case law relating to the duty of good faith
Clause 6 (3)
Provides penalties for serious and sustained breaches of good faith
Clause 11
Requires parties to continue to bargain rather than allow specific matters to impede further bargaining
Clause 15
New section 50J - allows the Authority to fix the provisions of collective agreements where there has been a serious and sustained breach of good faith in collective bargaining

Collective Bargaining

Does the Bill promote collective bargaining?

Yes. The promotion of collective bargaining is a key object of the Employment Relations Act. Union representation can give employees a more effective voice in dealing with their employer. Collective agreements are also an efficient means of setting the terms and conditions that can help underpin a successful business and support a growing economy.

What barriers are there to collective bargaining?

Unions face administrative barriers in organising employees collectively, particularly in multi-party bargaining. Protracted bargaining can increase the costs of bargaining for all parties and result in unproductive disputes. Collective bargaining can also be undermined through the practice of 'free riding', which is the automatic passing on of collectively bargained terms and conditions to employees on individual agreements.

Why change the law on collective bargaining?

Some employers have hampered union representation while others have actively undermined collective bargaining and settlement - in particular, through the practice of automatically passing on collectively bargained terms and conditions to employee employed on individual agreements, also known as "free riding".

These actions are clearly contrary to the original intent of the Act, so changes will be made to provide better incentives and simpler and clearer processes for collective bargaining.

Are employers allowed to discourage employees from participating in collective bargaining?


Should one sticking point over a specific issue prevent further bargaining over other issues?


Should collective bargaining normally result in a collective employment agreement unless there is a good reason not to?


Will unions be able to seek prior authorisation from union members to agree to a settlement, without having to go back for ratification once a settlement has been reached with the employer(s)?


Will collective employment agreements be able to recognise the benefits of a collective agreement by including terms such as the payment of an additional sum, or other benefits to employees covered by the collective agreement?

Yes, this is the case now and the Bill simply confirms it.

Are there any changes to multi-employer or multi-union collective bargaining?

Yes, in multi-employer and/or multi-union collective bargaining, the unions and employers must attend or be represented in at least one bargaining meeting after bargaining has been initiated. If they do not, they will have breached their duty of good faith and could be subject to a penalty.

A short cut to multi-employer and/or multi-union collective agreements will be available. Other unions and/or employers will be able to join an existing collective employment agreement, where the original collective agreement specifically allows this to happen.

How will these changes help multi-employer or multi-employer collective bargaining?

The process for adding other unions or employers to existing collective agreements will be much simpler and quicker. Employers and unions who want to allow other unions or employers to join their collective employment agreement in the future can include a clause in the agreement allowing this to happen. Then, if another employer or union wants to join the collective employment agreement, they will be able to by following a simple process and without having to wait for collective bargaining to be initiated again.

Will unions and employers be able to use a third party to help them in negotiations when they are in difficulty?

Yes, a new third party facilitation process will be available through the Employment Relations Authority to be used in certain circumstances to help parties who are having serious difficulties in concluding a collective agreement. The outcome of third party facilitation may be a non-binding recommendation on matters in dispute. At the end of the facilitation process the Authority can make recommendations to the parties.

Will recommendations made following the third party facilitation process be binding?


How does third party facilitation by the Authority differ from compulsory arbitration?

Third party facilitation is not binding. The Authority can only make recommendations.

Is there any ability at all for the Authority to set the terms and conditions of an employment agreement?

There is a one instance where the Authority can set the terms and conditions of an employment agreement. This is where negotiations have failed, mediation has failed and the negotiations were undermined by a serious and sustained breach of good faith by one or both parties.

What has been done to address the issue of free-riding?

Employers must not deliberately undermine collective bargaining or collective agreements by automatically passing on collectively bargained terms and conditions to employees not covered by that collective agreement.

What will happen if a employer automatically passes on the same terms and conditions as provided in the collective agreement?

A union could apply to the Employment Relations Authority for a determination on whether the employer has breached the duty of good faith by breaching the free-riding provisions. If the Authority finds that there has been a breach, it could impose a penalty on the employer (see 1.4).

Does this mean that employers have to pay employees on individual agreements less than they pay employees on a collective agreement?

No. There is no requirement for employers to pay employees on individual agreements less than employee covered by a collective agreement. The important thing is that employers must undertake genuine negotiations over individual agreements.

When can employers pass on to employees on individual agreements the same employment terms and conditions as those in the collective agreement?

So long as the employer undertakes genuine negotiations with employee over individual agreements and has not set out to undermine collective bargaining or the collective agreement, the employer will be able to enter into individual agreement with terms and conditions that are the same as those of the collective agreement OR if the parties agree to pass on the terms and conditions.

What will be taken into account when assessing whether the employer intended to or did in fact, undermine collective bargaining or the collective agreement?

The following criteria would be taken into account by the Authority:

whether the employer undertook genuine negotiations with the employee over the individual agreement
whether the employer consulted the union before concluding the individual agreement
the number of the employer's employees covered by the collective agreement or collective bargaining compared to the number of employees who are not
how long the collective agreement has been in force

It is also intended to provide more guidance in the form of a code of employment practice.

Can unions and employers agree that collectively bargained terms and conditions be offered to employee on individual agreements?


Are there any changes to provisions about union fees?

Yes, where a union member wants his or her employer to deduct union fees from their wages or salary, the employer will be required to do so, even if that union member is on an individual employment agreement. At present employers only have to deduct union fees for those union members covered by a collective employment agreement. This change will not affect employees who are not union members.

Has the distinction between formal stop work meetings and on-site discussions between an employee and a union representative been clarified?

Yes, employers will not be allowed to dock an employee's wages or salary for the time spent in discussion with a union representative.

Have there been any changes to reassure the public that they will be safe in circumstances where industrial action may take place in essential services?

Yes, the Bill requires the Minister of Health to establish a code of employment practice for the health sector. This will require parties covered by the code to provide for health and safety of the public during industrial action. A breach of the code by any parties who are covered by it will be a breach of good faith.

Bill References
Clause 6(3)
Makes it a breach of good faith for an employer to advise an employee not to participate in collective bargaining
Clause 8
Confirms that collective agreements can contain terms or conditions intended to recognise the benefits of a collective agreement
Clause 12
States that duty of good faith requires collective bargaining to result in a collective agreement unless there is a genuine reason not to
Clause 14
Requires parties to multi-party bargaining to attend at least one meeting to work out the bargaining arrangements
Clause 16
Allows unions to seek their members' authority to agree to a settlement without further need for ratification
Clause 18
Allows subsequent union and employer parties to join existing collective agreements, where the agreements provide for this
Clause 19
Addresses undermining of collective bargaining and collective agreements by passing on collective provisions to other employees and other unions
Clause 33A Minister of Health must, by notice in the Gazette approve one of more codes of employment practice that provide for matters relating to the health and safety of patients during strikes and lockouts in the health sector. A breach of the code by parties covered by it, will be a breach of good faith.

Improved Problem Resolution

Does the Bill clarify the law surrounding personal grievances?

Yes. Presently what constitutes "unjustifiable dismissal" is not defined in the Act and some court decisions have been inconsistent with the intent of the Act. The personal grievance provisions of the Act will be changed to make it clear that the legal test, when deciding whether actions or dismissals are justified, should be an objective test - ie what would a fair and reasonable employer do in the situation. Employers will have to consider and balance the legitimate interests of both the employer and the employee.

This change is being made because case law has been widely interpreted to mean that only the employers' perspective counts.

Is mediation the beginning of resolving a problem?

No, it has been made clear that employers, unions and employees must first try to discuss and resolve their problems themselves before seeking mediation.

How have mediation services been extended?

The Department of Labour will be able to be offer mediation services to people who are in work relationships that are not employment relationships, such as sharemilkers and labour-only contractors.

Does this mean that employment legislation will apply to these types of work relationships?

No, it simply provides a free mediation forum for people with work-related problems. Both the parties to the work-related problem will have to agree to mediation - a person cannot be compelled to enter mediation.

What is a "fast track" mediation service?

The Bill empowers the chief executive of the Department of Labour to set specific processes and procedures to govern the conduct of mediations, in order to expedite speedy and effective problem resolution.

Fast track mediation would differ from normal mediation as follows:

it would be made available to the parties at short notice, provided that they agreed to a shortened mediation to attempt to resolve the problem; and
the parties would enter the process in a clear expectation that, if they did not reach an agreement during the specified time, they would agree to a mediator-made decision by agreement under section 150 of the Act.

Is there any change to the payment of monetary settlements in mediation?

Yes. Any monetary settlements in mediation must be paid directly to the applicant, rather than to their representative, except in cases where legal aid has been granted. This should reduce the incentives for representatives to inflate monetary claims in mediation and will give applicants greater control over any monetary settlement. The Department of Labour, in consultation with other agencies, will also develop a guide on representation fees.

Also, when the Authority orders an employer to pay money to a employee, the Authority will be able to order payment by instalment, where the employer's financial situation warrants it.

What has been done to ensure agreements reached in mediation are upheld by each party?

Where an employer or employee has agreed that a mediated settlement will be final and binding, they will not be able to cancel it. If a party breaches a settlement, the other party can apply to the Employment Relations Authority for a penalty to be imposed on the party in breach, as well as enforcing the original settlement.

There will also be penalties for breaching the terms of an agreed settlement that has been decided, at the request of the parties, by a Department of Labour mediator. Again, the original settlement can still be enforced as well.

How does the Bill clarify the interaction of the problem resolution process run by the Department of Labour mediation services and the Human Rights Commission?

It will be made clear that where an employee is seeking resolution of a problem, they must choose between applying to the Employment Relations Authority for an investigation or bringing proceedings before the Human Rights Review Tribunal. Once they have made that choice and commenced their action, they cannot later decide to try the problem resolution services, including mediation, of the other forum.

Has clarity and direction been provided to state sector employees to them resolving employment issues?

Yes. State sector employees will be required to use the Act's problem-solving mechanisms to resolve employment relationship problems rather than seeking judicial review of their employer's actions. This will ensure state sector employees follow the same problem resolution processes as other employees and do not bypass mediation or the Employment Relations Authority.

How does the Bill simplify legal procedures?

The Bill provides that the Authority's processes cannot be judicially reviewed until after the applicant has exercised their right to challenge the determination in the Employment Court. Also, the Court's ability to hear and determine procedural matters relating to an Authority investigation that is in progress is removed.

What changes have been made to allow the Authority more flexibility in its investigation processes while ensuring the Authority complies with the principles of natural justice?

During Authority investigations, the Authority member can deal with one of the parties in the absence of the other party. The Authority member must then provide the other party with any material that is relevant to that party's case and gives them an opportunity to comment on it.

Will the Authority be empowered to order new remedies in personal grievance cases?

Yes. Where the Authority finds that workplace conduct or practices have been a significant factor in a personal grievance, the Authority will be able to recommend the employer take action to prevent similar employment relationship problems happening.

What are the changes to strikes and lockouts provisions?

Employers will be clearly prohibited from discriminating against union members who taken part in a lawful strike.

Bill References
Clause 37
Provides an objective test for justifiability in personal grievance cases
Clause 46
Expressly allows mediation services to be offered to parties in work-related relationships that are not employment relationships

Protection In Transfer Of Employment Situations

Why is this amendment necessary?

All employees deserve to be considered when a business is sold or transferred to a new owner.

Currently when the legal ownership of a business changes - through a sale, transfer or contracting situation - the employment relationship ceases. This allows the new employer to choose which employees to hire and offer terms and conditions for that work on a take-it-or leave-it basis. The new provisions require employers and employees to negotiate what will happen in a change of business situation so everyone is clear in advance and employees will not be disadvantaged at a time when they are particularly vulnerable. There are also provisions that provide a higher level of guaranteed statutory protection to specified groups of employees that are considered vulnerable to, and disadvantaged by, change of employer situations.

What form will this consideration take?

Most employment agreements - individual and collective - must have a clause describing what steps the employer will take to protect employees affected by any sale, transfer or initial contracting out of business.

How must employers comply with this new protection for employees?

As with any employment agreement the actual clauses are subject to negotiation between the employer and employees, but all employment agreements must include:

the process the employer will follow in negotiation with a new employer about the terms and conditions of transfer of affected employees
the matters relating to the affected employees that the employer will negotiate with the new employer, including whether affected employees will transfer on the same terms and conditions
in the event of no transfer of employment, the process that will be followed at the time of restructuring to determine what entitlements, if any, are available for employees who are made redundant.

Are there any additional protections for vulnerable employees?

Yes, vulnerable employees will have the additional protections of:

The right to transfer to a new employer on their existing terms and conditions where there is the same or substantially similar work to perform.
The right to negotiated redundancy entitlements from the new employer if the employee is made redundant for reasons associated with the transfer.
If the agreement does not deal with the issue of redundancy entitlements, and no agreement on this can be reached, the employee has the right to have the Employment Relations Authority determine the matter based on criteria including: any other redundancy entitlements in the agreement, employee's length of service, amount of notice given of the redundancy, employee choosing not to transfer to the new employer, ability of the employer to provide redundancy, likelihood of the employee being re-employed or any other relevant matter.

When will these protections apply to vulnerable employees?

These protections will apply to vulnerable employees when:

An employer enters into an agreement under which their business or part of it is undertaken by another person
An employer sells or transfers their business or part of it, or when
A contract under which an employer carried out work on behalf of a client is terminated and awarded to another provider (succession to contract)

What criteria are used to determine the groups of vulnerable employees?

The criteria for employees to be considered "vulnerable" are whether:

the employees concerned are employed in a sector in which the restructuring of an employer's business occurs frequently, and
the restructuring of businesses in the sector concerned has tended to undermine employee's terms and conditions of employment, and
the employees concerned are employed in a labour intensive sector in low paid work, and
have little bargaining power.

Once a group of employees has been categorised as "vulnerable", how do they get added to the Act's schedule thereby qualifying for a higher level of statutory protection?

The mechanism for adding a group of employees to the Act will be for Cabinet to decide whether a particular group of employees meets the criteria and passes the "vulnerable" test. The group would then be added to the Act's schedule by Order in Council. Before the Cabinet considers whether a group is "vulnerable" the Minister of Labour must consult with the sector employees and unions.

Does the Bill propose that any group of employees be designated as "vulnerable"?

Yes. The Bill designates employees carrying out the following functions as "vulnerable":

cleaning services or food services
laundry services or orderly services for the age-related residential care sector
laundry services for the education and health sectors
orderly services for the health sector
caretaking for the education sector

Can an employee take a job with the new employer on the same terms and conditions and receive redundancy as well?


Bill References
Clause 30, Part 6A,Subpart 1
New section 69B "restructuring" definition -
New section 69F - provides vulnerable employee with the right to elect to transfer to the new employer Schedule 1 Sets out the groups of employees designated as "vulnerable"

Equal Pay

What are the changes to the laws on equal pay?

The Government Service Equal Pay Act 1960 and the Equal Pay Act 1972 will be replaced to update the law on equal pay for the same or substantially similar work and cover both government and private sector employees.

Is the right to equal pay the same as pay equity?

No. The Equal Pay Act 1972, and the amendments to the Act under the Bill, address gender-based discrimination in pay. The Equal Pay provisions will require that two employees of opposite sex who work for the same employer and perform the same or substantially similar work, must be paid equally.

How does equal pay fit into the duty of good faith?

Providing equal pay to employees is part of an employer's duty of good faith under the Employment Relations Act.

How do employees find out if they are receiving equal pay?

Employees will have the right to ask their employer about whether they are, or have been receiving equal pay.

What obligations will this place on the employer?

Employers will have to consider and respond to an employee's equal pay query in good faith. If an employee is not receiving equal pay, the employer must correct the situation, which includes paying the employee any back pay owed.

What role will Labour Inspectors play in relation to equal pay?

An employer can ask a Labour Inspector to help them respond to an equal pay query. Also, employees who are not satisfied with their employer's response to an equal pay query can complain to a Labour Inspector who will then be able to investigate.

What powers will a Labour Inspector have to investigate an equal pay query?

During an equal pay investigation, a Labour Inspector can require employers to provide the following information:

wage records
job descriptions
information about the classification of work in that workplace
pay and promotion scales and/or processes
any other relevant information

After a Labour Inspector has investigated what happens next?

After an investigation the Labour Inspector must inform the employee and the employer about the results of their investigation. They can also make a recommendation to the employer about what the employer must do to comply with equal pay obligations.

What happens if an employer does not follow a Labour Inspector's recommendation?

The employee has three choices:

for the Labour Inspector, on behalf of the employee, to apply to the Employment Relations Authority to recover arrears of equal pay for the employee; or
to raise a personal grievance under the Employment Relations Act and, if the employer still doesn't give the employee equal pay, apply to the Employment Relations Authority for a determination; or
to make a complaint to the Human Rights Commission and, if the employer still doesn't give the employee equal pay, bring proceedings before the Human Rights Review Tribunal.

What happens if the Employment Relations Authority finds an employer has breached the Equal Pay Act?

Where the Authority finds the employer has breached the Equal Pay Act, the Authority can:

order the employer to pay the employee back pay, representing the additional pay the employee should have received
order the employer to comply with the Equal Pay Act
impose a penalty on the employer

Employers cannot dismiss or disadvantage employees solely because they have made an equal pay query or complaint.

Employment Relations Educations Leave

What are the changes to Employment Relations Education Leave?

The following key changes have been made:

All union members will be eligible for employment relations education leave (EREL), not just those members covered by a collective employment agreement.
The Minister of Labour can approve employment relations education and health and safety courses without having to place a notice in the Gazette. This allows the Minister to use more accessible and cost effective means of notification.
EREL entitlements are to be calculated using the number of employees employed by the employer as at one month before "the specified date" (defined in section 71 of the Act).

Bill References
Clause 73 Requires employers to deal with employees in good faith when dealing with equal pay
Clause 81 Empowers Labour Inspectors to conduct equal pay investigations
Clause 87 Empowers Labour Inspectors to take enforcement action Clause 88 Allows for recovery of wage arrears
Clause 89 Provides penalties for breaches of equal pay requirements
Schedule 3 Section 137 ERA amendments - allow for compliance orders
Schedule 3 Section 104(1) and new section 107A, ERA Protect employees from discrimination

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