THE NEW ZEALAND EMPLOYMENT RELATIONS ACT TURNS THREE SHOULD WE CELEBRATE? WHAT HAS IT ACHIEVED? by Paul Tremewan*, Esq. New Zealand

Introduction

New Zealand has had a legislative framework covering labour relations for over 100 years, starting with the Industrial, Conciliation and Arbitration Act of 1894. Several labour relations laws succeeded the 1894 Act until a watershed act was passed in 1991—the Employment Contracts Act—which almost caused the disappearance of the union movement, and limited labour relations regulations to the contractual relationship between employers and employees. Union access to workplaces was only by agreement with the employer, which meant that unions lost huge numbers of members because they were unable to access them at work.

The Labour Government elected in 1999 passed as a matter of priority the Employment Relations Act of 2000, which promoted good faith bargaining and collective bargaining, and sought to recognize and correct what it perceived to be an inequality of bargaining power during the previous decade. Companies responded to the 2000 Act by moving off shore and refusing to face the prospect of the same industrial chaos and turmoil which had plagued New Zealand labour relations during the 1980s.

When the original legislation was proposed, it was part of a bigger package that included: changes to the Accident Compensation Commission (ACC)--which runs the no-fault accident insurance plan for all of New Zealand, paid parental leave and other matters, which all added to the compliance costs of employing people. At the time, we wrote to the Prime Minister (PM) and the Minister of Labour, the Hon. Margaret Wilson, stating that 13 companies whom we represented decided that legislation would create too much of a disincentive to remain in New Zealand, and they all relocated to Australia where they would service New Zealand out of Sydney. When they did move, all those jobs disappeared and have never been replaced. Regarding our letter, we never received the courtesy of a response from either the PM or the Minister of Labour.

One of the aims of the new legislation was to increase the influence of unions. The Objectives of the Act of 2000 included acknowledging and addressing the inherent inequality of bargaining power. However, statistics from the Monitoring and Policy Unit of the Department of Labour show that, in March 2001, the percentage unionized of the total employed labour force was 17.7%. The latest figures are for March 2003, which show the unionized rate now at 17.6%, an actual drop in percentages.

More significantly, Paul Merwood of the Labour Department says that the figure in real numbers is slightly different. From March 2001, the number of union members was 331,313; and in March 2003, the number of union members was 334,044. This gives an increase in union membership of .82%. The new legislation caused a lot of pain and difficulty for an actual return in union membership numbers of less than 1%. Was it worth it?

The Union Movement

One of the major benefactors from the new legislation has been the union movement. When the Act was passed union membership was at an all-time low of 17% of the total employed workforce. While the Labour Minister, when challenged some months after the passing of the Act, responded that she did not in fact believe that the number of union members in the workforce would ever be over about 30%, there was still a very real trepidation among employers that this new legislation would totally unionize all workplaces.

The main part of the legislation for Unions was that it gave them right of access to recruit members—something that they could only do under the previous legislation with the permission of the employer. This was seen as a great deal for most unions who had been decimated during the previous ten years. First, unions went on recruitment binges. However this caused problems. While 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, the reality was much harder to deliver.

Some unions deliberately cut back on recruitment, as they simply were not able to service such a new influx of members. And as a consequence of that many joined for weeks or even months, and then left the unions just as fast as they had joined. There was a real problem in that the unions, except for the major unions such as the New Zealand Engineers Manufacturing and Printing Union (NZEMPU)and the New Zealand Public Service Association (NZPSA), have not been able to deliver on the their promises.

The Sanford Limited strike in the South Island, trying to force a multi-site collective agreement, lasted 10 weeks before there was a return to work. The members endured 10 weeks of Timaru and Bluff extremes on picket lines chasing something they thought the Act would deliver: a multi-site agreement because that was what the Union claimed. The Act was not able to deliver such benefits.

The Act, while it requires the parties to bargain in good faith, has been a great problem for the Unions because it makes no obligation on either party to enter into a collective agreement. The Council of Trade Unions (CTU)--the central trade union organization representing all the aligned unions--are seeking to have this part of the Act changed so that the parties have to negotiate towards the establishment of the collective agreement. This will be hotly contested by employers, who do not mind bargaining, so long as they still have the right to say, "well, no, you have not convinced us of the need for a collective agreement."

After three years, we still do not know how to bargain in good faith, but at what point this process ceases to be in good faith—as when one party declines to enter into a collective—is still open for debate and is still subject to proceedings before the Authority.

As far as delivery for a moribund union movement, the Act appeared a godsend. The rights of entry were a lifeline to securing new members. However while this happened initially, the membership numbers have slipped, the promises of newly negotiated riches have not materialized, and the number of concluded collective agreements has fallen. We recently negotiated one covering two union members!

There have also been a great number of new unions created, with the help of law firms specializing in setting up in-house unions. The benefit of these unions is that they are unimpeded by union movement politics and external agendas. These unions are set up and negotiate their collective agreement, and then all goes quiet once again. This effectively has subverted the Act, as this was what was happening under the previous legislation save for the requirement to become a registered union.

Good Faith

The Act made much of the obligation for parties in employment relationships to deal with one another in good faith. Indeed the first major case dealt with this requirement. Baguley v. Coutts Cars went all the way to the Court of Appeal, but once there the court said that all the new legislation did was to reinforce the obligations of good faith, which pre-existed the Act. In other words, the new legislation introduced no novel concepts regarding good faith. According to Baguley v. Coutts Cars, these notions pre-existed the new Act. So why were they 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. This is a concept long espoused by the general secretary of NZEMPU, Andrew Little, who recognizes that for his members to remain in long-term employment, their employers need to be able to compete successfully. However, the recent case of AMI v. Finsec was a bit of an aberration when the Chief Judge of the Employment Court made statements firmly undermining any requirement on the part of unions or employers, that is, to act in good faith or work toward the benefit of all in relation to each other. The Chief Judge 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.” And another stunning observation from the Chief Judge, regarding the company’s complaint about the unions attack on non-union members:

“Unionists do not hesitate to use pithy epithets to describe non-union employees in this category (employees not willing to join the union), it is a way of pricking the consciences of non-union employees, but such statements cannot possibly have any impact on the employer that it is entitled to complain about in a court of law.”

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

The Mediation Service

Originally the Employment Tribunal members had a dual role. They were mediators and then in another case the adjudicator. The roles interchanged, and any mediation had the benefit of a mediator who in the next case might be the adjudicator. The system was very efficient and effective. These were highly experienced and skilled practitioners. They were judicial officers.

The Hon. Margaret Wilson, with the passing of the Act, has managed to make the Mediation Service just another adjunct to the Labour Department; and the appointed mediators were clearly not chosen for or seen as judicial appointments. Immediately following the passing of the Act, the Mediation Service faced severe credibility issues. The rash of new mediators appeared remarkable in their collective inexperience in employment law, industrial relations and employment relations issues. Fortunately for the Service, several of the former Tribunal Members stayed. These few senior mediators have had to bear the burden of the serious mediation work where industrial disputes have occurred over the last three years. Walter Grills in Dunedin mediated the Sanford ten-week strike, and the log-ship loading disputes at various South Island Ports. Colleen Hicks and Judith Scott dealt with the teachers and nurses and related medical sector major disputes in the North Island. A former Tribunal Member from Christchurch, Maurice Teen, was the mediator of the Kinleith CHH--Carter Holt Harvey is one of New Zealand's largest privately owned companies; its United States partner owns 51% and the rest is publicly owned in New Zealand--three-month restructuring/wage talk disputes. Now after three years the Mediation Service seems to have set its own meritocracy in its allocation of resources to resolve disputes. It needed to. One has to observe that the majority of the appointments from three years ago have all developed into competent, efficient and effective mediators.

The Mediation Service is a success story under the new Act. While there were real fears about its structure after it was set up, it now has an 80% success rate at resolving matters which are referred to it. Given the objective of the Act of making mediation the primary dispute solving procedure, then the Act has certainly delivered on this.

The Employment Relations Authority

The Employment Relations Authority ("the Authority") started in a blaze of unexpected and possibly unwanted publicity when one of the new Members, Susan Bathgate, a Wellington barrister, was found to be in full-time pay as an ERA Member, at the same time as she was being paid as a Member of two other judicial bodies. Triple-time pay is not uncommon in the industrial world, but not at Authority level.

The Authority replaced the Employment Tribunal, where highly skilled and long serving Tribunal members were both mediators and adjudicators. Several of the existing members became Authority members. The Hon. Margaret Wilson caused great concern when she appointed a raft of totally new people to conduct the business of the new Authority. The number of Tribunal members was suddenly effectively redundant. Several brought a bitterly contested case against the Crown based on the unexpired parts of the Warrants. They were unsuccessful. But it showed that the Minister was going to put “her stamp” on the selection of individuals who were to run the Authority. Susan Bathgate wasn’t a good start.

The Authority has been reasonably successful in that it was the first New Zealand judicial body which conducts its proceedings on an investigative method. This means that the Authority Member conducts the Investigation, and then lawyers and advocates and advisors all follow along behind and help the Authority by suggesting that certain lines of enquiry might be followed, or certain lines of questions should be asked. Generally the lawyers are very much bit in the standard Authority hearing.

One of the major problems the Authority faces after three years is the difference in the quality of the procedures followed by its various members. There are those who conduct the full investigation, and then open it for questions; and there are those who begin the investigation, but then let the whole process lapse into a rather expensive across-table mediation, where basically anything goes. This causes a great deal of stress to parties before the Authority who are unsure of whether they should get involved in the debate across the table rather than wait to be asked. Then, if that does not work, the Act provided for the whole matter to be heard all over again—this time in the Employment Court where at least the rules of evidence and procedure are given some modicum of recognition.

One of the benefits of the new Act has been the fact that cases can now get to the Authority without too much delay, cost, drama, or preliminary proceedings; and once there, matters are usually disposed of reasonably efficiently. The Authority, as an institution, has proven over its three years that this method of dispute resolution is more efficient than the process under the old Employment Tribunal. Whether they get the answer more correct than the Tribunal is always a question that does not have any justifiable or provable answer.

The Employment Court

The Employment Court is probably the least affected of the institutions following the passing of the new legislation. However, there was a great deal of concern when the Employment Relations Act provided that any party not satisfied with a determination of the Authority could file for a de novo hearing in the Employment Court. In the past, one was only able to appeal on questions of law. Now if a party is not happy after the Authority’s decision, the whole matter can be heard all over again in the Court. There were already long delays in getting cases before the Employment Court, so the promise of droves of disappointed litigants became another reality. However, while the Employment Court has been relatively unscathed by the new legislation, it has been busy dealing with the interpretive cases. One point that the Court has taken on is the stated objective in the legislation that mediation should be the primary problem solving mechanism. Often now, the Court will direct parties back to mediation, even part way through a hearing. Previously, the Court always imagined that if a case was going to be solved, it was probably going to be solved before the opening addresses.

The Labour Inspectorate

Three years ago, the Hon. Richard Prebble described this body as “industrial traffic wardens.” Nothing they have done in the past three years has changed that perception. It is now the role of the Occupational Safety and Health (OSH) Office--a government agency responsible for policing health and safety in employment matters--to oversee the industrial accident and safety matters which used to be the domain of the labour inspectorate. There can be no justification to retain both a group of people who offer employment advice and assistance on a 0800 number, and at the same time have people in the Labour Department whose primary role it seems is to bring Holidays Act prosecutions.

 

Conclusion

In a recent address to the Employment Law Institute, Hon. Margaret Wilson said that the Employment Relations Act was implemented to “build and maintain productive employment relationships, as part of its broader strategy for a more productive and equitable society and economy.” But in 2001 she saw stagnant productivity, a significant reduction in the level of unionism, and increasing levels of income inequity leading to a decline in the skills base. This led to the passing of the Act to swing the “power pendulum” back to the workforce. But has it happened? The economic indicators are all positive with the economy never as robust as it has been in the past three years, so there is little to argue about. But what did the Act do? Not a lot, we suggest, other than function as a disincentive to employ new staff, and an incentive to look for ways to contract out of direct hire and if possible relocate off shore. None of these were in New Zealand workers interests.

My post graduate Diploma students over the last three years have been completing assignments gauging the impact of the Act on their respective businesses. They have been asked whether their employers have encompassed the spirit of the Act. The overwhelming number have researched and 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 New Zealand Journal of Industrial Relations, in January 2003, published the findings of a survey of 639 businesses, which showed that only 5% of employers found the Act to have had a positive effect on their businesses. On the other hand only 28% said that there was a negative effect. And as echoed above, 56% said that it had no impact whatsoever.

In conclusion, the economy is very 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 being offered, businesses moving off shore and businesses looking more and more to contracting out. We predict that the next three years will be more of the same; minimum union activity, except in the traditional areas; and for the rest, nothing will happen, other than all new employees will be issued new employment agreements to sign before they actually commence employment.

*Paul Tremewan is an employment lawyer and human resources consultant who lives in Auckland, New Zealand, who and teaches employment law at the University of Auckland.Back to Text