Fair Pay Agreements: Redressing the workplace power imbalance

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A few weeks ago the Labour Government announced its intention of introducing Fair Pay Agreements. This is a step towards better reflecting human rights in the context of labour relations.

The proposed Fair Pay Agreements are intended to be applicable between employers and unions across a particular industry upon request by 10% or 1000 workers and under certain conditions. Strikes, for example, will not be permitted during Fair Pay Agreement negotiations. Such agreements would set minimum standards across industries and (re)entrench unions as key bargaining parties in the negotiation of collective agreements, as, it should be noted, has continued to be the case with some strong unions, particularly in the public service. If agreement is not reached in negotiations, then the Employment Relations Authority will set the terms.

This proposal has been met with robust criticism, including reference to earlier periods of industrial relations in New Zealand, especially during the 1970s and 1980s, when unions were stronger and strikes more frequent. It seems reasonable therefore to consider this latest modest proposal in the wider context of ‘work rights’, where it might be seen as one small step in the cyclical history of attempts at redressing the power imbalance between employer and employee.

From the late 19th century the Industrial Revolution gave fresh emphasis to the need to address that imbalance between employer and employee, by means of some form of collective organisation and action: hence the establishment of trade unions, recognised in Britain in the Trade Union Act 1871, and elsewhere in Europe and in North America in that era. In New Zealand trade unions were legally recognised in the novel structures introduced by the Industrial Conciliation and Arbitration Act 1894. This Act also introduced a system of compulsory state arbitration for employment agreements and disputes for those unions which registered under it. (It was compulsory for employers).

But it also curtailed the right to strike, the last resort of a workers’ collective.

Meanwhile, at the international level, one of the purposes of the International Labour Organisation (ILO), formed in 1919, was similarly to recognise and encourage remedial collective action at national and international level. Coupled with a right to freedom of association, such collective bargaining is a key feature in the ILO’s founding Constitution, in the Declaration of Philadelphia of 1941, in ILO Conventions 87 and 98, in Article 8 of the ICESCR, and, most recently and importantly, in the 1998 Declaration on Fundamental Principles and Rights at Work.

This Declaration sets out four key principles and rights and the eight ILO Conventions which enact them. These categories are: freedom of association and the effective recognition of the right to collective bargaining, the elimination of forced or compulsory labour, the abolition of child labour and the elimination of discrimination in respect of employment and occupation.  It is applicable to all people and states, whether or not they are members of the ILO or have ratified these Conventions.(New Zealand has been a member of the ILO since its beginning). That this list includes collective bargaining, at a period when adherence to this principle was weakened in many member states, demonstrates the importance which the ILO has always attached to it.

In New Zealand, although the 1894 Act was amended several times, for example with regard to compulsory union membership, and renamed in the Industrial Relations Act 1973, the system which it established remained essentially similar until 1991. Then the 4th National Government, emboldened by the wholesale social changes introduced in the 1980s by the 4th Labour Government and by skilful lobbying by pressure groups such as the Business Roundtable, enacted the Employment Contracts Act 1991.

This Act completely altered our industrial relations framework.  It in effect abolished ‘unions’ (they are not even mentioned there by name), including in their role as key bargaining agents for workers. It prioritised instead individual contracts and limited any collective bargaining to a single, or a few, employers and entrenched ‘free-riding’.

 Although the employment relations system did require some re- balancing, for example with regard to the frequent use of strike action and the representational effectiveness of unions themselves,the scale of the changes was extreme, as was the ruthlessness and speed with which they were implemented.

There were widespread protests and marches at home and criticism internationally. The Council of Trade Unions (CTU) lodged a formal complaint with the ILO, in accordance with its established procedures, but the resulting critical recommendations were ignored by the National Government.

In 2000 the pendulum began to swing back again with some remedial measures in the Labour Coalition Government’s Employment Relations Act 2000, notably with the re-recognition of unions. Similarly, the 2017 Labour-led Coalition Government made some further changes (including the abolition of ‘zero-hours’ contracts) on the slow path back to a more acceptable balance. The present Labour Government has continued on this path, for example with increases in the minimum wage. The proposed Fair Pay Agreements are a further small step to improve the position of employees in areas of employment where unions have traditionally been weak (or since the ECA often non-existent), such as clerical workers, cleaners and those in the hospitality industries, the same workers as had benefitted from the 1894 Act.

There is some irony in the fact that that many of those who have criticised this modest proposal are themselves members of representative groups. Farmers, lawyers, senior doctors, even employers themselves, all enjoy the protection of and benefit from the lobbying skills of well-funded organisations. Although not trade unions as such, these coalitions do provide proof, if any were needed, of the necessity and effectiveness of collective organisation and action at all levels and in all sorts of work places.


NOTE: The Human Rights Foundation’s blog presents a human rights perspective on current issues. Through it, we aim to highlight human rights in general, as they provide: (1) a set of agreed international standards, under which governments, including ours, have obligations to their peoples; (2) information on policies and practices which can be useful models for adapting to local conditions.