Fair Pay Agreements

The Fair Pay Agreements Act 2022 has now passed and applications to initiate bargaining can be made from 1 December 2022.

The Fair Pay Agreements system

The Fair Pay Agreements system brings together unions and employer associations within a sector to bargain for minimum employment terms for all covered employees in an industry or occupation. This means that these organisations will meet to discuss and agree on a set of employment terms for the work being done. In some situations, the Employment Relations Authority (the Authority) may determine what those minimum employment terms will be.

Bargaining is between an employee side and an employer side

Fair Pay Agreement bargaining is between an employer bargaining side. Eligible unions that are approved to be an employee bargaining party bargain on the employee bargaining side. They will represent all covered employees, including employees that are not members of the union. If the work you perform is covered by the proposed Fair Pay Agreement, the union(s) will bargain on your behalf.

Eligible employer associations, including industry associations, approved to be an employer bargaining party, bargain on the employer bargaining side. These organisations must also bargain on behalf of employers that are not their members.

Māori must be represented

Both bargaining sides must use their best efforts to make sure Māori employees and employers are represented in the process. This includes by:

• getting and considering feedback from Māori employees and employers
• considering whether each bargaining side should include a member that represents the interests of Māori employees or employers.

Employment terms that must be in a Fair Pay Agreement

A Fair Pay Agreement must include what work is covered by the agreement and standard hours, minimum base rates (including overtime rates and penalty rates), training and development, how much leave an employee can have and how long the agreement applies for.

Bargaining, voting and the Fair Pay Agreement becoming binding and enforceable

It will take time for both bargaining sides to come to an agreement on a set of employment terms they both agree with. Once the bargaining sides agree and the proposed Fair Pay Agreement is confirmed to be compliant with the law, covered employees and employers in that sector will be able to vote on whether they agree with the terms or not. If a majority agrees from both bargaining sides, the voting process and result will be confirmed by MBIE (the Ministry of Business, Innovation and Employment) and the Fair Pay Agreement will be finalised and be binding and enforceable.

Employment Relations Authority’s role

The Authority has a range of roles under the Fair Pay Agreements Act, including:

• resolving disputes relating to proposed Fair Pay Agreements
• assessing and approving Fair Pay Agreements, once bargaining sides have agreed. When agreed the proposed Fair Pay Agreement must be jointly submitted to the Authority by both bargaining sides so that the Authority can assess whether the proposed Fair Pay Agreement complies with the law, and whether its coverage overlaps with an existing Fair Pay Agreement
• making a determination about which agreement provides the better terms overall if a proposed Fair Pay Agreement overlaps with an existing Fair Pay Agreement. A determination is a decision made by the Authority
• making a recommendation about the content of an employment term in a Fair Pay Agreement. When bargaining sides can not agree on a term in a proposed Fair Pay Agreement a bargaining side can make an application to the Authority to make a recommendation
• making a determination to fix the terms of a proposed Fair Pay Agreement, this includes if:
  • the bargaining sides cannot reach an agreement
  • there has been a breach of the duty of good faith that was deliberate, serious and sustained or undermined bargaining, or
  • the ratification vote has failed twice.
• making a determination whether or not an employee is a covered employee, or whether or not an employer is a covered employer, for a proposed or finalised Fair Pay Agreement
• imposing penalties under the Fair Pay Agreements Act.

The Authority can set the terms of a Fair Pay Agreement if no party comes forward to bargain on the side that did not initiate bargaining

The Authority also has an important role if there is no bargaining party on the side that did not initiate bargaining.

The Fair Pay Agreement system relies on employee and employer bargaining sides to bargain with each other. If there is no willing and suitable bargaining party on one side, bargaining may be held up.

Starting the bargaining process for a new Fair Pay Agreement

Only a union can apply to initiate bargaining for a new proposed Fair Pay Agreement. If, after three months of getting approval to start bargaining, no eligible representative has stepped forward to be a bargaining party on the employer side, then a default bargaining party (defined in the law) will have one further month to decide whether they will bargain on the employer side. If the default bargaining party chooses not to be a bargaining party, an employee bargaining party can apply for the Authority to set the terms of the Fair Pay Agreement.

In addition, if during bargaining all the bargaining parties on the employer side stop being bargaining parties, the default bargaining party would have one month to decide whether to bargain. If they decide not to, then an employee bargaining party can apply for the Authority to set the terms of the Fair Pay Agreement.

If this happens, the Authority will fix the terms without any bargaining occurring.

If the initiating union does not apply to the Authority within three months from being notified that it can apply, the process to develop the proposed Fair Pay Agreement stops. 

More information

More detailed information about how the system works can be found on the Employment New Zealand website.

Fair Pay Agreements – Employment New Zealand(external link)