Status of the Employment Relations Act

The Bill was introduced on 26 April 2013, received its second reading on 19 March 2014, but was then shelved until after the election. It was reported back to the House on 22 October and is now law.

New Employees

The previous Act provided for all new employees to automatically become covered by a prevailing MECA regardless of union membership. A new employee had 30 days within which to join the Union and continue to be covered by the MECA, albeit that if they did not join they still got the MECA terms as an IEA.

The new Act has repealed this provision (see below) leaving new employees employed on whatever IEA the employer choses to offer unless they join the union (in which case they will be covered by the MECA.) The new act is as follows with the repealed section being the old “30 day rule”.

At the time when the employee enters into the individual employment agreement with an employer, the employer must—

  • Inform the employee
  • That the collective agreement exists and covers work to be done by the employee; and
  • That the employee may join the union that is a party to the collective agreement; and
  • About how to contact the union; and
  • That, if the employee joins the union, the employee will be bound by the collective agreement; and
  • [Repealed]
  • Give the employee a copy of the collective agreement; and
  • If the employee agrees, inform the union as soon as practicable that the employee has entered into the individual employment agreement with the employer.

So the employer must still tell a new employee of the existence of the Union and MECA, but does not have to give them its terms and conditions unless they join the Union. It will be imperative going forward that we make all new employees aware of this provision.

Effect on Collective Bargaining

The main policy change which the Bill effects is the deletion from s.31 of the object that “the duty of good faith… requires parties bargaining for a collective agreement to conclude a collective agreement unless there is genuine reason, based on reasonable grounds, not to”.

This policy change is implemented by the substitution of a new s.33, which provides expressly that the duty of good faith does not require the parties to enter into a collective agreement or to agree on any matter for inclusion in a collective agreement. The one rider to that change is the statutory confirmation that an employer who refuses to enter into a collective agreement because of its opposition, in principle, to collective bargaining or being a party to a collective agreement, constitutes a breach of good faith.

Deleted also is the provision in s.32(1)(ca), currently to the effect that the duty of good faith requires that even though the union and the employer have come to a standstill or reached a deadlock about a matter in their bargaining, they must continue to bargain about any other matters on which they have not reached agreement.

These changes may substantially emasculate the concept of good faith in collective bargaining. For example, under the new Act an employer could probably reach a position quite quickly that the parties were deadlocked over a critical matter (e.g. pay rates), and for that reason alone state there was no point and therefore no good faith obligation to continue bargaining over other matters. While the Employment Court will no doubt do its best to give some residual, substantive content to the duty of good faith in the context of collective bargaining, these changes could mean that collective negotiations might come to an end quite swiftly.

Allied to these changes, and of note in the public health sector, is the right of an employer to opt out of MECA bargaining, by notice given within ten days of receipt of the notice initiating bargaining. Equally, an employer may opt out of bargaining for an agreement that the employer become a party to a concluded MECA. The effect of opting out is that from the date on which the opt-out notice is given, the employer ceases to be a party to the bargaining, and to have any further obligations in relation to that bargaining. It will be interesting to see if the DHBs enthusiasm for MECAs remain under this provision.

The provision which has received the most media attention is the insertion of a new s.50K, by which a party to bargaining for a collective agreement may apply to the ERA for a determination as to whether bargaining has concluded “because of difficulties in concluding bargaining”. The section does not list exhaustively the criteria the Authority must consider in determining whether bargaining has concluded. The only two criteria it is expressly required to consider are whether an attempt has been made to resolve the difficulties in concluding bargaining by the use of mediation or facilitation.

The section goes further by requiring the Authority to direct that facilitation be used before the Authority commences a s.50K investigation, if any of the grounds set out in s.50C(1) exist, although that requirement is subject to four stated exceptions, for example that facilitation “will be otherwise impractical or inappropriate in the circumstances”.

Section 50C(1) states that the Authority must not accept a reference for facilitation unless satisfied that 1 or more of the following grounds exist:

That —

  • In the course of the bargaining, a party has failed to comply with the duty of good faith in section 4; and the failure—was serious and sustained; and has undermined the bargaining

That —

  • The bargaining has been unduly protracted; and
  • Extensive efforts (including mediation) have failed to resolve the difficulties that have precluded the parties from entering into a collective agreement:

That —

  • In the course of the bargaining there has been 1 or more strikes or lockouts; and
  • The strikes or lockouts have been protracted or acrimonious

That —

  • In the course of bargaining, a party has proposed a strike or lockout; and
  • The strike or lockout, if it were to occur, would be likely to affect the public interest substantially; i.e. if the strike or lockout is likely to endanger the life, safety, or health of persons; or the strike or lockout is likely to disrupt social, environmental, or economic interests and the effects of the disruption are likely to be widespread, long-term, or irreversible

If the Authority should determine that bargaining has not concluded, it may make a recommendation as to the process the parties should follow to resolve the difficulties in concluding the bargaining. Where it makes such a recommendation, no party may make another application under s.50K until the process recommended by the Authority has been followed. Alternatively, the Authority may refrain from making a recommendation, in which case no party may make a further application under s.50K for a period of 60 days after that determination.

Where however the Authority determines that bargaining has concluded, it must make a declaration to that effect. Furthermore, no party may initiate bargaining again until the expiry of 60 days from the date of the Authority’s determination.

Partial Strikes

New sections 95A-95H will enable employers to make specified pay deductions from an employee who participates in a partial strike. (A total cessation of work is already covered by the “no work — no pay” principle).

Essentially a partial strike is defined as any strike where the employees are nevertheless continuing to perform some work, and would include:

  • Refusing, or failing to accept, particular tasks that would normally form part of their duties, such as answering phone
  • Reducing their normal performance, e.g “working to rule”.
  • Reducing their normal output or normal rate of work, i.e. a “go-slow”.
  • Breaking some aspect of their employment agreement,e. g. by refusing to wear the prescribed uniform.

Where there is a partial strike, s.95D will allow the employer to make specified pay deductions from the salary or wages of those employees who participate in the strike, subject to prior written notice being given. Such deductions may be made without having to suspend or lock out the employees. In certain circumstances, and again subject to the provision of prior written notice, the employer may even claw back wages which have been paid but which were intended to have been deducted.

In essence the employer may deduct from the employee’s pay the time attributable to the partial strike as a proportion of the employee’s usual hours of work, or alternatively a 10 percent deduction “regardless of whether the amount of deduction calculated in accordance with subsection (1) would have been more or less than 10% ”. It stands to reason therefore that if employees are going to participate in a partial strike, they would be unwise to strike for anything less than 10% of their usual hours of work; because that is the minimum specified pay deduction which an employer can be expected to make under these provisions.

A union (but not the striking employees) is entitled to request in writing an explanation of how the employer has calculated pay deductions made under the Act and if not satisfied with the explanation and information provided by the employer, ultimately the union may refer the dispute to the ERA for determination.

Potentially of some significance is the express exclusion from the employer’s right to make pay deductions, of cases of refusal to work overtime or to perform call-out work (if the employee would otherwise receive a special payment for call-outs). In reporting the Bill back to the House, the majority Select Committee Report advised that:

“[We] would not count a refusal to work overtime or to perform call-out work as a partial strike, because in such situations the employee would have discontinued their employment fully,“ that is, such refusals would count as a full strike.”