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**RESPONDING TO CHANGE IN THE WORKPLACE:**

**INNOVATIONS IN LABOR-MANAGEMENT-GOVERNMENT COOPERATION**

**New Zealand Case Study**

# **NEW ZEALAND**

June 25 -- 26, 2001 Mexico City, Mexico

**APEC SYMPOSIUM- "RESPONDING TO CHANGE IN THE WORKPLACE: INNOVATIONS IN
LABOUR-MANAGEMENT-GOVERNMENT COOPERATION"**

##### New Zealand Case Study to be presented by Professor Nigel Haworth

> [Contextual background to Employment Relations in New
> Zealand]{.underline}

From the 1890s until the late 1980s, New Zealand's employment relations
environment was characterised by a centralised framework with a national
awards-based negotiation of employment terms and conditions. Disputes
were addressed through compulsory arbitration, and unions, on behalf of
their members, took personal grievances with employers. Unions were
effectively given exclusive coverage over employees employed in
industries specified in the coverage clause of their union rules and
they bargained through the centralised framework with employers.
Personal grievance procedures were introduced in the 1970's for
employees covered by awards, while other employees had to use the
ordinary court system for redress.

Enterprises may have been covered by a number of awards as coverage was
based on the work employees were engaged in rather than the workplace.

Amendments were made to this model by the Labour Relations Act 1987 to
encourage enterprise bargaining, but the outcome of these changes was
ambiguous as the legislation was repealed by the National Government in
1991.

> The introduction of the Employment Contracts Act 1991 provided a
> fundamental change to the employment relations framework. It provided
> employees with the right to determine whether they wished to be
> represented by a union or other bargaining representatives. This Act
> also provided for employees to either be employed on an individual
> employment contract or to be party to a collective contract with their
> employer. It is noted that concerns were raised about the ability of
> employees to exercise choice in deciding whether to be covered by
> individual or collective employment contracts under the Employment
> Contracts Act.
>
> Unions were not required to be parties to collective employment
> contracts. This was a negotiable matter. This Act applied universally
> to all employees, which had the effect of extending the jurisdiction
> of the personal grievance procedures to cover all employees for the
> first time. The rationale of the new model was the creation of an
> employment relations system in tune with the prevailing model of macro
> and micro economic changes in the New Zealand economy. These changes
> were largely related to the fundamental economic restructuring in New
> Zealand from a centralised regulated economy to one more open to the
> influence of market forces.

# The current employment relations framework in New Zealand

> The Employment Relations Act (ERA) came into effect on 2 October 2000.
> It was introduced by a new government in response to concerns about
> the ECA and its impact on employees and unions.
>
> Under the ERA, the employment relations framework in New Zealand is
> guided by the promotion of mutual trust and confidence to assist in
> the development of more productive employment relationships. The
> Government has promoted mutual trust and confidence in order to
> recognise the social and economic elements of the employment
> relationship, rather than viewing the employment relationship as a
> pure contractual exchange. Mutual trust and confidence between
> employers, unions and employees enable the parties to interact
> effectively and efficiently, minimising employment relationship
> problems. In turn, this environment is expected to contribute to
> improved company performance and national economic progress. It is
> noted that there had been obligations of fair dealing in employment
> relationships, which had developed from case law.

## Another component of the employment relations framework and the ERA is the promotion of the principles underlying International Labour Organisation Convention 87 on Freedom of Association and Convention 98 on the Right to Organise and Bargain Collectively. 

> The ERA promotes good faith in all aspects of employment relationships
> as a means of ensuring productive employment relationships. The good
> faith obligation applies equally to all parties involved in employment
> relationships such as:

-   employers and unions,

-   employers and other employers,

-   employers and unions,

-   unions and other unions,

-   unions and members, and

-   employers and employees.

> The ERA provides guidance on the practical application of good faith
> in areas such as consultation and communication during bargaining,
> redundancy and access to workplaces. The ERA gives particular focus to
> the application of good faith to the collective bargaining process. A
> tripartite committee has developed a Code of Good Faith Bargaining for
> Collective Agreements to provide specific, practical assistance to
> this aspect of the good faith duty.
>
> The ERA also recognises the potential imbalance of bargaining power
> between employers and employees in the employment relationship and
> therefore encourages collective bargaining. Unions are legally
> recognised by the ERA, and collective agreements can only be
> negotiated between unions and employers. The ERA views unions as
> providing a counterbalance to power imbalances in direct bargaining
> between employees and employers. Minimal barriers to the formation of
> unions allow employees to form their own unions to represent their
> collective interests when bargaining, including at the enterprise
> level.
>
> The ERA balances the promotion of collective bargaining with
> protection of the integrity of individual choice. Union membership
> remains voluntary and employees can determine whether they are
> represented during bargaining or in other aspects of their employment
> relationship, and who represents them. The ERA also ensures that
> employees negotiating on an individual basis are informed of their
> employment rights and that their relationship with employers is built
> upon mutual trust and confidence.
>
> All employment agreements must be in writing and include details such
> as the work to be performed, applicable wages and salaries, place of
> work and an explanation of the services available for the resolution
> of employment relationship problems. These provisions ensure that
> parties are aware of and address fundamental aspects of the employment
> relationships and allow for productive and beneficial employment
> relationships.
>
> The provision of mediation and low-level dispute resolution is another
> mechanism used to maintain productive employment relationships. The
> focus taken by mediators is to provide efficient, effective assistance
> to the parties, so that employment relationship problems can be
> resolved and the employment relationship maintained. Parties, either
> directly or where they have not resolved their problems in mediation,
> can apply to have their case heard in the Employment Relations
> Authority. This body seeks to resolve an employment relationship
> problem by establishing the facts and making a determination according
> to the substantial merits of the case, without allowing technicalities
> to hinder the resolution of the problem. The Authority makes
> inquisitorial findings rather than arbitrated settlements and is a
> low-level and speedy institution.
>
> Labour Inspectors are responsible for enforcing aspects of the
> employment relationship that relate to the minimum standards of
> employment. These statutory conditions provide minimum wages and leave
> entitlements even if not specified in employment agreements. Labour
> Inspectors can provide free assistance for either employers or
> employees on minimum entitlement issues.

# Innovations in Labour-Management- Government Co-operation

> New Zealand has recently developed a range of innovative practices to
> address identified employment relations needs and promote productivity
> in the labour market. This paper discusses the following:

-   the success of the Mediation Service in meeting its clients needs
    and effectively resolving employment relationship problems,

-   the development of best practice guidance to address identified
    information needs and promote productive employment relationships,

-   the work of consultative committees, which represent a range of
    community interests, informing policy development and implementation
    on identified employment relations issues, and

-   a monitoring and evaluation programme measuring the effect of the
    ERA on the labour market.

# The Mediation Service

> The provision of free and confidential mediation services by the
> Department of Labour focuses on the resolution of employment
> relationship problems quickly and at a low level. The intention is to
> reduce the need for judicial intervention. The aim of the Mediation
> Service is to work with employers and employees to maintain employment
> relationships by assisting the parties to reach solutions themselves.
> The Mediation Service ensures that their assistance meets the diverse
> needs of their clients, and the range of employment relationship
> problems presented.
>
> Mediation is provided with particular attention given to access and
> timeliness to meet client needs. Parties can access the mediation
> services either directly through one of seven offices in regional
> centres or through a free-phone Employment Relations Info-line. The
> info-line can provide

-   information about employment rights and the services available

-   answers to questions about employment relationship problems

-   referral to Labour Inspectors if the enquiry involves breaches of
    the minimum code e.g. holiday pay, minimum wages

-   referral to one of the Mediation Service offices

> During the first six months under the ERA, the mediators have provided
> speedy and accessible assistance, with a high rate of problem
> resolution. 2,219 applications for assistance were completed during
> this period, of which

-   16% were completed within one week,

-   50% by week 4,

-   67% by week 6,

-   77% by week 8, and

-   92% were completed within 12 weeks.

> As the Mediation Service deals with a wide range of problems, the
> mediators recruited reflect a range of age, gender, ethnicity and
> employment backgrounds. This provides the Service with the skills and
> backgrounds to provide assistance to a wide range of employment
> relationship problems. The range of problems dealt with may be broken
> down as follows:

-   55% of problems are personal grievances,

-   9% are related to the recovery of wages,

-   6% are related to disputes regarding the interpretation, application
    or operation of an employment agreement,

-   5% are related to individual employment agreements,

-   4% are problems relating to disciplinary procedures,

-   4% are problems relating to redundancy.

Anecdotal feedback from the mediators indicates that the removal of both
prescribed forms (required under the Employment Contracts Act) and a fee
has reduced the barriers to accessing mediation, allowing a wider range
of people to use the Service. A review of the Mediation Service is
currently underway including consultation with representatives of
employers, employees and unions.

# The Development of Best Practice Guidance

> The Employment Relations Service of the Department of Labour is in the
> process of developing best practice guidance across a range of issues.
> The best practice guidance is designed to provide participants in the
> labour market with information that enables the prevention of problems
> before they disrupt the employment relationship. Best practice
> guidance is being developed in response to demand from both
> experienced and non-experienced practitioners for information on
> employment relations issues, particularly good faith.
>
> The best practice guidance projects will produce resources such as
> booklets and seminars to inform labour market participants about:

-   the policies surrounding good faith, and international policies and
    procedures used to implement good faith; and

-   the procedures that can be used, and the assistance that is
    available, to resolve employment relationship problems.

> The use of advisory groups to feed diverse views and experiences into
> the development of policy
>
> Since the introduction of the ERA, four advisory groups have been set
> up to support the development and implementation of policy. These
> groups reflect a range of employer and union backgrounds, ethnicities
> and include experts with relevant expertise. They have advised the
> Government on the following:

-   A Code of Good Faith Bargaining for Collective Agreements, which
    includes guidelines that parties can use to develop an agreed
    bargaining process, particularly when meeting and dealing with
    breaches of good faith.

-   The nature and scope of equal employment opportunities legislation
    to improve labour market outcomes for those groups currently
    disadvantaged in the labour market.

-   Possible options for amending the Holidays Act that accommodate
    increased diversity in working patterns and increase productivity,
    while balancing the needs of employers and employees.

-   The current situation and possible policy options for providing
    protections for the wages and conditions of work, in the event of a
    business being transferred or sold, or where the work of such staff
    is contracted out.

> The advisory groups act as groups of experts drawing on practitioners
> as well as academics, whose role was to provide the Government with
> advice from wide perspectives. People and views represented on the
> groups include Maori, Pacific peoples, youth, employers and unions.
> This ensures that Government policies capture the needs and issues
> faced by participants in the labour market and by the wider community.
>
> Ongoing evaluation of the implementation of the ERA and whether this
> meets the objectives of the employment relations framework
>
> The Department of Labour is conducting a 3-year evaluation of changes
> in the labour market since the introduction of the ERA. This is in
> addition to the ongoing monitoring strategy undertaken of the ERA
> institutions (Mediation Service, Employment Relations Authority) and
> the monitoring of collective bargaining outcomes.
>
> The strategy for evaluation of the ERA will include assessment of
> whether the objectives of the Act and medium term outcomes are
> achieved. The key objective of the ERA that will be assessed is the
> building of productive employment relationships through the promotion
> of mutual trust and confidence. Research has been developed to provide
> information identification and information collection processes and
> will also include an analysis of impacts on a range of affected
> parties including employers, employees, unions and industry
> organisations.

**BUSINESS NEW ZEALAND COMMENT**

# Contextual Background to Employment Relations in New Zealand

While over the years from the first Industrial Conciliation and
Arbitration Act of 1894 the basic features of New Zealand's centralised
award system remained essentially unchanged, the introduction in the
early 1970s of personal grievance and disputes procedures, applicable
only to union members covered by an industrial award, was a development
of some significance. Employees outside the award system -- usually
determined by an award salary bar -- had no rights of redress other than
through the ordinary court system. Award negotiations were generally
trade rather than industry based, and workers were effectively required
to join the registered union covering the kind of work in which they
were engaged. Consequently enterprises were subject to numbers of
different awards, depending upon the work in which their employees were
engaged.

The Employment Contracts Act 1991 was notable for extending employment
protections (disputes and personal grievance provisions) to all
employees. However, with regard to the Employment Relations Act's
emphasis on mutual trust and confidence, the requirement to act as a
fair and reasonable employer (which could well be said to equate to the
mutual trust and confidence concept) was, in relation to award workers,
been clearly stated by the Court of Appeal in 1985 (in Auckland and
Gisborne Shop Employees IUOW v Woolworths (New Zealand) Ltd \[1985\]
NZACJ 963). Shortly after, in relation to employees not covered by an
award, the Court of Appeal (quoting, among other decisions, its own
findings in the Woolworths case) similarly commented that: "Fair and
reasonable treatment is so generally expected today that the law may
come to recognise it as an ordinary obligation of a contract of
service". (Marlborough Harbour Board v Goulden, CA 103/85). In much the
same way the courts have long found that certain comparable employee
obligations arise from the employer/employee relationship.

With respect to the Employment Relation's Act promotion of the
principles underlying International Labour Organisation Conventions 87,
Freedom of Association and 98, Collective Bargaining, arguably at least,
the Employment Contracts Act did not deny these Conventions. That Act,
unlike its predecessors, allowed complete freedom of choice both to
organise and to bargain collectively (including a right of choice to
employers).

The paper makes much of the fact that the Employment Relations Act
recognises the potential imbalance of bargaining power between employers
and employees but it should be noted that the existence of such an
imbalance is open to question. Skills shortages often mean that any
apparent power imbalance is automatically reversed, while in relation to
employment termination the imbalance clearly favours the employee.
Employees may terminate their employment at any time, provided notice
requirements are observed, but this is not the case for employers, who,
however, justified a termination in substance, face onerous court (and
now statute) imposed procedural requirements.

The statement that the Employment Relations Act balances the promotion
of collective bargaining with protection of the integrity of individual
choice is also open to question. Rather, the Act sets out to influence
choice in the direction of collective bargaining. New employees who are
not union members must be told of any applicable collective agreement
and will be covered by that agreement for the first 30 days of their
employment. Although subsequently, if they do not join the relevant
union in the mean time (when the collective agreement will automatically
apply), new employees may negotiate any terms and conditions as they see
fit, the Act 's persuasive powers are clearly focused on ensuring that
this does not happen. Where employees do negotiate on an individual
basis, with or without the Act, an employer would be taken as required
to conduct the relationship in a fair and reasonable manner (the mutual
trust and confidence equivalent).

As a final comment, while consultative committees have considered a
range of issues, there are dangers in involving representatives of
various community groups in such discussions. Though such people may be
very well intended, it is often the case that they have little real
appreciation of the imperatives under which enterprises operate and the
effects that undue legislative intervention can have on employment
creation.

#### NEW ZEALAND COUNCIL OF TRADE UNIONS COMMENT

# Contextual Background To Employment Relations In NZ

The NZCTU disagrees with the paper**'**s assessment that the ERA gave
workers any real ability to choose between individual and collective
employment contracts -as implied in the statement that **"**employees
could also decide whether to negotiate an individual employment contract
or be party to a collective contract with their employer**"**.

The NZCTU considers it might be useful to state more explicitly what was
**"**the prevailing model of macro and micro economic changes in the New
Zealand economy**"** that was the underpinning rationale for the ECA. It
would also be helpful to identify the problems experienced under the
ECA, which gave rise to the ERA.

# The Current Employment Relations Framework in NZ

The NZCTU notes that there is a discussion about section 3 (a) (ii) of
the ERA which highlights the importance of **"**acknowledging and
addressing the inherent inequality of bargaining power in employment
relationships**"**. It is interesting to note that this paper talks
about the **"**potential**"** rather than **"**inherent**"** imbalance
of bargaining power between employers and workers. The NZCTU believes
that this is an inaccurate depiction of the Act**'**s objects, and
reflects the paper**'**s overall tone which is to underplay the concerns
of both workers, unions and the Government about the need for
legislation that addresses this inequality.

The NZCTU notes that unions are being consulted as part of the Mediation
Service review. Issues raised to date include a related concern that
many mediators do not have an adequate understanding of the power
imbalance between employers and workers. Other concerns expressed were:

-   the variability of competence

-   some lack of legal knowledge

-   inexperience with collective bargaining

-   a too hands-off/facilitative approach (there is no point in marriage
    guidance when it is about the terms of a divorce settlement)

-   mediators requiring confidentiality when it is a negotiable issue

-   mediators not acting in accordance with ERA objects (e.g. not
    acknowledging and addressing the inherent inequality of bargaining
    power nor promoting collective bargaining)

-   the need for an available "toolbox" at end of this Review