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Andrew Little Address to Industrial Relations Conf




I have been asked to talk about the factors that make up a constructive relationship between the union and an employer. I want to explain not only why positive employer/employee/union relationships work, but how they work. I will go through some examples of how good quality employer/union relationships have fundamentally changed business practice and, importantly, business performance.

I also want to take some time to address what is a growing issue for many union members today, and that is the issue of freeloaders – people at work who get union-negotiated benefits even though they’re not in the union. The issue is most suitably discussed in the context of an address about constructive workplace relationships. I want to introduce some challenging ideas about how to think about this issue.


Perhaps its because I am a lawyer by training, or perhaps it is because industrial or employment legislation is such a fertile ground for political debate, but it is hard to avoid the current legislation, the Employment Relations Act, as a starting point for what at least the public policy makers think should be the basis of workplace relationships.

The Employment Relations Act says its object is to build productive employment relationships. It says it aims to do this by promoting mutual trust and confidence and by acknowledging the need for good faith, recognising the inequality of bargaining power, promoting collective bargaining, etc.

The primary objective of the legislation, productive employment relationships, will be – or should be – the goal of most employers irrespective of the legislation. The same can be said about promoting trust and confidence, and even “good faith”.

In pursuing these goals, whether because the legislation states they are a public policy objective or whether because they are a sensible business objective, they are the same whether the workforce is a unionised one or a non-union one, or a partially unionised one. In spite of this, even now when many unions become involved in the workplace relationship the view is taken that effective relationships are not possible or become a whole lot harder to establish.

I have spoken to many conferences in the past couple of years and spoken about the need for underlying mutual respect between employers and unions. That means not just unions respecting the role and right of business to make money and manage its assets effectively, but also employers recognising unions’ legitimate right to organise and represent their members to advance their interests within the enterprise, industry and beyond. The role of the union is not necessarily antithetical to business – it may, in some respects, be complementary – but there will inevitably be points of conflict and disagreement that need to be resolved in the best interests of all.

It is often challenging for business to accept the role that organised labour can play inside the business. Clearly, unions wish to secure good and fair wages and conditions, including safe conditions of work, and employers may regard unions as simply having a role to negotiate these from time to time. But the collective interests of workers go beyond merely the wages they earn and the conditions under which they work. Workers have interests in relation to issues such as training, company strategy and direction, ethical conduct of the company (the business’s corporate citizenship) and so on.

If the employer uses its power to try to restrict the union’s role to one simply of collective bargaining, then it can expect all manner of issues, including some not necessarily suited to the bargaining context, to be bargained over. This has the potential to significantly increase the risk of conflictual and disputatious behaviour. Where the union’s full gamut of interests is recognised and processes are in place to engage with the employer on those, whether through bargaining or through non-bargaining processes, there is correspondingly a lower risk that conflict and disputes will break out to such an extent that it impedes or obstructs business.

Whether or not employers take a restricted view of the role of organised labour or a more expansive view will depend on the environment in the workplace (whether it is one of openness and genuine mutuality) and the degree of trust and confidence between the employer, union officials and employees.

The benefits to an employer of an effective relationship with the union are significant. The examples I will now discuss show that good quality, mutually beneficial relationships are possible. You have already seen yesterday how an effective relationship with the union has enabled NZ Post to remain competitive. Let’s look at other cases.

One large employer, let’s call it company A, which is a manufacturer of a predominantly exported commodity many years ago engaged with the union to create new work practices, a new remuneration system and a new style of engagement with the union.

The approach followed years of conflict and came at a time when employee suspicion of the employer was high. Problems the employer faced included a huge overtime bill, a relatively high proportion of down-time on its plant and equipment, and reluctant acceptance of new technology. Over several years, acting under a clear strategy, the employer has placed greater planning responsibility for work on those who do it, and stripped out a tier of management as a result. The employer shifted from remuneration based on hourly pay to salarised incomes, and the employer invested heavily in training and aligned its training framework to the National Qualifications Framework. Notwithstanding conflict in the early stages of the rollout of the strategy, throughout the strategy the employer has not only engaged with the union on each step, but on a quarterly basis the union (both workplace delegates and paid officials) sit down with the company to review progress and direction. Commercially sensitive information is freely disclosed at these review meetings.

To date, the company has seen a massive drop in overtime; employees no longer have an incentive to work more than 40 hours in order to win penal and overtime rates, they have an incentive to work efficiently and effectively and complete their work within their basic shift roster. By allowing the employees, themselves to organise the way in which the work is done and to set their own goals and targets consistent with the company’s overall performance requirements, the workforce has significantly reduced plant and equipment down time. Fairly old equipment is breaking records for continuous operation.

At this workplace, the most commonly expressed frustration is not what the employer has or has not done, but the fact that many of the workers have reached a stage in their training that the qualifications framework cannot keep up and they cannot obtain additional qualifications for what they have trained in.

This site was always a fully unionised site. It had, and continues to have, its fair share of disputes and legal action. In the midst all of this, however, the key actors on the employer’s side and the union’s side (including workplace delegates), were able to see there was a greater good in the future and were committed to working towards it. The employer took huge risks, particularly in the disclosure of information. It has won the loyalty of its workforce and it shares the benefits, as does the workforce. The employer has not, at any time, challenged the role or legitimacy of the union and has not tried to bypass the union.

Company B is another that has always been fully unionised. It is a heavy engineering fabricator. It always provided reasonable terms and conditions of employment for its workforce. Collective bargaining was often hard fought but the outcome was generally regarded as fair by all sides. Once or twice a year, the managing director of the company would brief the local union secretary on the affairs of the company.
Three or four years ago the company faced a very difficult time. Work dried up, reflecting general economic conditions and work taken on on a speculative basis had not yielded any results. The company asked the workforce, through the union, to accept some concessions to get it through a difficult time. The company undertook that it would not lay anyone off for a period of 12 months providing it could secure the concessions. Although very difficult, agreement was reached on these points as well as on a basis for paying bonuses should circumstances change and the company be able to afford to pay its workforce more.

Twelve months later, the fortunes of the company turned around. Business started expanding, the speculative work started generating more work orders. A whole new division was spawned. And the employer is now a victim of major skill shortages in its region.

Through an effective relationship with the union – one based on openness and honesty – the company was able to achieve agreement that gave it a breathing space that allowed it to survive.

Company C is a slightly different story again. Its workforce was partially unionised – about 50/50. The company had made a virtue of encouraging new and existing employees to accept individual employment arrangements. It provided marginally better benefits for employees on individual agreements as opposed to collective agreements. Indeed, wages settlements for employees on individual agreements were always half a percent or so ahead of what the union was able to achieve for its members.

In the past couple of years, the company underwent a major change rationalising its product line. The union had never enjoyed a particularly good relationship with the company; indeed, the union had good workplace delegates who routinely challenged the company and ensured compliance with contractual obligations which the company often resented.

As the company went through the change process which inevitably was to involve redundancies (which the union accepted, subject to selection and termination procedures being fair) the company was surprised to find that those most vociferous about being accepted for redundancy (and picking up healthy redundancy compensation) were those on individual employment arrangements. Recently, the manager said to me that there was an acceptance now that the company’s original strategy was wrong. The company realised that in encouraging employees on individual agreements it had, far from encouraging a greater sense of personal or individual responsibility, simply encouraged greed and greater self-interest. The manager remarked to me how those who had stayed with the company and worked hardest to make its new operation work were those who were predominantly on the collective agreement; they had shown a greater commitment to the product and, ironically, the company’s interests.

I am happy to report that we currently enjoy a positive relationship with that company, something that we have not enjoyed for many many years.

So what are the key elements of building constructive relationships?

Apart from standard and obvious things such as being consistent, doing what you say you are going to do, and so on, key factors leading to the establishment of a high trust environment in the workplace include the following:

Openness: this means sharing information willingly and engaging with the union and the workforce over it. In some respects, it may involve taking risks about information that is disclosed.

Staying focussed on the objective, which is a good quality relationship. Establishing a good relationship often entails experiencing conflict, suffering disagreements and so on. Just because ideas or strategies are challenged or questioned does not mean there is resistance to them. And such challenges and questioning may and should highlight possible flaws and difficulties that, with some further thinking, might be overcome.

Accepting that the journey to building a high degree of trust and confidence means sharing achievements and celebrating them together, and accepting there will be failures but not defeats.

Accepting that knowledge and wisdom resides at all levels throughout an organisation, and that some ideas or strategies have to find their own way within the organisation. That is, there needs to be some flexibility in how outcomes are achieved if workers are to take ownership of them.

Underlying all of this is having the right attitude. If you go into the relationship thinking the union will be destructive, then all you will see is obstruction. If you go into the relationship accepting that the union has a legitimate role to play then you will find that the union’s contribution, providing it is well-informed, can assist in good business practice.

I now want to turn to the issue I mentioned at the beginning of this address, the issue of freeloaders.


One of the things that most undermines the possibility of optimal workforce relationships in many unionised or partially unionised workplaces is the practice of the employer passing on union deals to non-union employees. Unionists call workers who are in this situation “freeloaders”. They have other names for employers who engage in the practice.

Even employers who often have good relationships with a union or unions, and who prefer to deal with the union, often for their own convenience will simply pass on union-negotiated benefits to non-union workers.

There are problems with this. Union members are left feeling that they have made a contribution and have done the work to get the benefits, and yet others who contribute nothing get the same benefits. This necessarily undermines members’ confidence in being a union member and remaining with the union. To say nothing of their attitude to the employer, who they will regard as unfair.

In a case of a simple pass-on of union-negotiated benefits to non-union workers there may be an argument that it is a breach of good faith. Section 32(1)(d)(iii) requires unions and employers to “not undermine or do anything that is likely to undermine the bargaining or the authority of the other in the bargaining;”

It is difficult to see how a simple pass-on of benefits negotiated by a union to non-union employees within a reasonable period after the conclusion of bargaining cannot be anything other than undermining the authority of the union in bargaining. More so when employers declare, as they often do before bargaining commences, that they will simply pass on the union deal.

But the good faith argument is difficult. And the issue is one of growing concern and anxiety amongst union members. At a recent meeting of around 400 EPMU members in Auckland (all drawn from a variety of different worksites) more than half the question and discussion time was taken up with the issue of what to do about freeloaders.

The Employment Court recently passed judgement on an attempt by a union and employer who enjoy a good relationship to overcome the freeloader problem. The case involved the Dairy Workers Union and a Fonterra subsidiary. The union and employer had agreed in their collective agreement to effectively impose a bargaining agency fee on non-union employees. The Employment Court had little difficulty in finding that the arrangement contravened both the Employment Relations Act and the Wages Protection Act (which, amongst other things, prohibits employers directing employees how to spend their wages).

In the dairy workers’ case, the court necessarily echoed the Employment Relations Act objectives, which include ensuring that employees have the “freedom to choose whether or not to form a union or be members of a union for the purpose of advancing their collective employment interests” (section 7(a)) and prohibitions on arrangements that go against voluntary membership of unions. The Court was, no doubt, also mindful of s.3(a)(iv) which says that one of the objects of the Act is “protecting the integrity of individual choice”.

But how much sense does a right not to join a union make when you become a beneficiary of the existence of the union without making any deliberate choice at all?

And what of the employer who decides he or she would rather deal with the workforce on a collective basis, and with skilled advocates, than with employees individually or in unco-ordinated groups?

The case for freedom of choice or integrity of individual choice in the employment context is interesting.
It needs to be remembered that the nature of the employment relationship is one that lacks freedom in a range of respects. Indeed, the relationship is one under which the employees agree, for a price, to surrender their freedom and provide their skills exclusively to a single employer. The employees must obey the reasonable and lawful instructions of their employer. The employees owe duties of fidelity, confidentiality and general competence to their employer.

These are all limits on personal freedom.

So, freedoms and rights in the employment context need to be balanced.

In my view, it would be entirely appropriate and consistent with a balance of relevant rights and freedoms for the legislation to allow a union and an employer to be able to agree that, for the purpose of effective workplace relationships in that particular workplace, people who wish to work there must agree to be employed under terms and conditions negotiated by the union and must, therefore, also belong to the union. In my view, legislating for this (and it would have to be legislated for given the current provisions of the Employment Relations Act) can be justified on the several grounds.

Employees in a workplace are part of a community of interest. That community of interest is even more clearly defined when your terms and conditions of employment, and indeed many other aspects of your employment relationship, are determined as a result of interactions and engagement between a union (or unions) and the employer. When you are, by definition, a member of a community of interest, and when – in spite of or against your own choice – you become a beneficiary of that community (and when you happily accept and enjoy those benefits) you lose the moral right, in my view, to claim that you have some further freedom of choice that means you do not contribute to that community. The question is no longer one of integrity of individual choice at this point but rather one of personal responsibility to the relevant community.

In a sense, the individuals have made their choices. They have acquiesced in the face of receiving greater and greater benefits. There is no moral justification for the argument that they owe nothing to those who have secured the benefits.

The concept of allowing for an agreement of this nature, under which some workers may be compelled to join a union, is better than the concept of a bargaining agency fee. It means that such workers can be properly and democratically involved in the organisation that secures their benefits.

There would be difficulties in what I am arguing for that would need to be overcome. How do you define the extent of the relevant workforce that should be obliged to join the union? What happens with multi-union sites? Could it work under multi-employer collective agreements?
This is not an argument for a general law of compulsion to join a union. It would be tempting to argue that the mere existence of unions in the community – even at 22% of all wage and salary earners – means they influence the wages of all employees. I think the connection between the mere existence of any union and the impact on all wages is difficult to draw.

There is, however, a clear connection between the existence of a union or unions in a single workplace, and wage levels in that workplace. The concept I am proposing is limited to individual workplaces.

There are other good reasons to consider this approach. A commercial reason – one that employers should understand – is that we are not in the business of working in the interests of those who do not contribute; we are not a charity.

The freeloader problem is turning into a major one for a growing number of workplaces where productive relationships are aspired to. Failure to address this issue will impede the ability to get the best.

We intend to make these points to any review of the ERA.

You may well ask why would the largest union, and a private sector union at that, raise this matter in this way. As I said before, the issue is one of concern and anxiety to many union members. The good faith law is probably inadequate to deal with the issue. And, in any event, to the extent that the legislation treats individual freedom of choice as some sacrosanct principle by which to operate, that principle needs to be balanced with the realities of the exercise of a range of freedoms in the employment context. In any event, it is clear that many employers, and indeed many non-union employees, have continued to act to make this an issue. In that sense, those employers and non-union employees have brought this on themselves.

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