Employment Relations Law Reform Bill — First Reading 
Employment Relations Law Reform Bill — First Reading 
[Volume:614;Page:10666] 
Employment Relations Law Reform Bill 
First Reading 
Hon MARGARET WILSON (Minister of Labour) 
: 
 I move  
That the Employment Relations Law Reform Bill be now read a first time. 
 I propose that this bill be referred to the Transport and Industrial Relations Committee with an instruction to the committee to present its final report within 6 months. As promised this Government has reviewed the Employment Relations Act. The review showed the Act is working well but could be improved. This bill addresses those areas where the Act can be strengthened to achieve better its key objectives of promoting good faith collective bargaining and the effective resolution of employment relations. The bill also provides protective measures for employees affected by the sale transfer and contracting-out of businesses. Finally it updates the equal pay legislation to reflect the changes made to the employment relations framework. 
The review of the Act showed uncertainty exists over the good-faith obligation and when and how it applies. The lack of penalties for breaches of good faith also encouraged some parties to flout their good-faith obligations. The bill therefore clarifies what good faith is in a broader concept than the common-law obligations of mutual trust and confidence and that addressing the inequality of power in employment relationships goes beyond focusing on bargaining power alone. It also confirms that good faith applies to individual bargaining situations and that there must be genuine negotiations over individual employment agreements. Stronger incentives for parties to act in good faith are provided by the introduction of penalties and remedies for serious and sustained breaches of good faith. 
The legislative incentives for the settlement of collective agreements have been relatively weak and unions have faced significant practical barriers in organising employees collectively to effect an agreement. This bill seeks to reduce those barriers while still preserving the freedom of individual choice. The bill also directly addresses the issue of free-riding: the practice of employers automatically passing on collectively bargained terms and conditions to employees employed on individual agreements during negotiations. The test will be whether an employer intended to and did in fact undermine the collective bargaining process or outcome. If so it will be a breach of good faith for the employer to pass on the same or similar terms and conditions as those in a collective agreement that is either being bargained for or has been settled. The emphasis is on the bargaining process both individual and collective used by the parties rather than on the outcome of that process. Unions and employers will not be prevented from agreeing that the collective terms and conditions may be passed on to employees employed on individual agreements. 
The bill also provides a new form of assistance to overcome impasses in collective bargaining and facilitate settlement wherever possible. It also makes explicit the principle that collective bargaining should result in a collective agreement unless there is a genuine reason why it should not. The bill will also facilitate the settlement of multi-employer and multi-union collective agreements. Other unions and employers will be able to easily join in existing collective agreement where the original agreement allows that to occur and all parties agree. 
There has also been some uncertainty about the interaction between the personal grievance provisions in the Employment Relations Act and the intent of the Act to balance the interests of fairness to both employers and employees. The bill makes it clear that employers must consider and balance the legitimate interest of employees when making the decision to dismiss someone and the tribunal or court that determines that matter also has to take into account both the actions of the employer and the employee. Overall the test is to be an objective one. This is not a radical revamp of the dismissal law. It draws from existing case law and fits well within good human resources practice. The bill also strengthens the mediation and Employment Relations Authority processes. 
Under the bill special protection will be given to specified groups of employees who are particularly vulnerable in change-of-employer situations and lack effective bargaining power such as cleaners and food service employees. Those employees will have the right to choose to transfer to the new employer on their current terms and conditions of employment. Other employees will also be given protection through the requirement for their employment agreements to contain an employee protection provision. Those provisions will describe what steps the employer will take to protect employees affected by a sale transfer or an initial contracting-out of business. 
The bill also introduces new equal pay provisions to replace both the Government Service Equal Pay Act of 1960 and the Equal Pay Act of 1972. The new provisions will update the law on equal pay and cover both Government and private sector employees. 
This bill introduces a good balance of practical and realistic measures that will strengthen the Employment Relations Act and further promote productive employment relations and practices. I commend the bill to the House. 
Hon ROGER SOWRY (National) 
: 
 That was a bit half-hearted I thought from the Minister. She is clearly under instructions to try to make sure that she does not advocate this bill too strongly. After all this is the Minister who had to pull these exact same provisions out of the Employment Relations Bill just 3 years ago. This is all the stuff that she tried to put into law during the winter of discontent and she had to pull it all out. But the unions have come knocking at the door and the Minister has done what she does best which is capitulate and say to them: “Yes I will have another go.” 
I want to say first of all that National totally opposes this bill. We will work with groups around New Zealand to motivate them to ensure that they fight this bill very very hard. I predict today that we will win and the Minister will lose. That is my prediction on what will occur because I know that the business community is very very angry at the lack of consultation on this legislation. I know that small businesses are only just coming to terms with the sort of answer that the Minister gave in the House today which is basically that if a small-business owner is going to sell the business and the buyer does not want to buy the staff that small-business owner is better off going into voluntary liquidation. That is why a lawyer said to me yesterday that this bill is good for him. There will be more voluntary liquidations. This bill will write goodwill off thousands of businesses all over New Zealand. A business that had some goodwill in it will see that goodwill written off because of this legislation. 
I want to talk about a few particulars in the bill and start with the issue of good faith. The bill now defines much more broadly the issue of good faith and the good old Labour Party not only defines good faith in a broader way but also socks the employer some fines. The employer who does not meet good faith now will face a $10000 fine. That is good faith is it not! But that is nothing new. This is the Government that whacked the fines in on the Holidays Bill and on the occupational safety and health legislation. Every chance it gets it winds up the fines for employers because it thinks that employers are rich fat people—and pretty nasty as well—who can afford to pay the fines. I see Dave Hereora and Lynne Pillay nodding away. That is their view—the good old trade union view of how the bosses are. 
 Now any failure by any employer to consult with the union when dealing with its unionised staff in a workplace will inevitably be an issue of breach of good faith. It is as simple as that. For example rest home operators dealing with staff who are members of the Service and Food Workers Union put an offer on the table to their elected delegates who accept it and sign up. The operators have not talked to the union officials; they have only talked to the delegates and that becomes a breach of good faith. That is outrageous. That plays into the union’s hands and leads to a centralised bargaining situation which is what the Government wants. That is exactly where this legislation is heading. 
The transfer of undertakings clause is where all employment agreements are required to address what process will be followed if a business is sold or work contracted out. For example the owners of corner dairies who hire staff members will have to put into their employment agreements the process they will follow including when they will disclose to those staff members that they will sell the business. 
Dave Hereora 
: Wonderful. 
Hon ROGER SOWRY 
: “Wonderful” say the Labour members. That means that they have no idea about the way business operates. It means that all employers will have to stipulate in all employment agreements the commercial terms they will follow in the event that they want to sell part of their business. That is an extra cost that every employer will now have to bear. 
I bet Labour members will not spend the summer holidays wandering around small retailers saying to them: “How many staff do you have? Next time you negotiate with them you will have to tell them how you will deal with them when you sell the business. That includes what the contractual obligations are between you and them and disclosing financial information to their union about the sale or transfer or contracting out of the business.” That is what I intend to do in summer. 
Dave Hereora 
: Marvellous. 
Hon ROGER SOWRY 
: Dave Hereora says “Marvellous”. I look forward to going into businesses that have three four and five staff—retailers—and telling them that this is what they will now have to do. 
Then we have the status of this new group of vulnerable employees. These are people who just so happen to belong to the Service and Food Workers Union. That is the union that most of the Labour caucus come from. Hands up—I think there are three or four in the House today—those who came from the Service and Food Workers Union! That is why that group of workers gets special treatment in this legislation. That group of workers have to be paid redundancy if the business is sold. 
Let me tell members what happens. Someone owns a footwear manufacturing business and the staff working on the machines are low paid. It is hard work—something that Labour people have never done. If the business is sold do they get redundancy? No they do not. But the cleaner who comes in and pushes the broom around does. The lady or man who runs the tuck-shop does but the person who might be on lower wages who is the cutter of the leather does not. So it is not done on wage or status in the workplace it is done on which union one belongs to and whether one has enough mates in the Labour caucus. What a load of nonsense that is. In that same footwear warehouse—not the retail Warehouse—the guy who looks after the nuggets gets nothing but the person who works in the tuck-shop gets the redundancy. There is no equity there. It is all about who one’s mates are. It is nonsense. 
I want to finish with the drive to get all employers into multi-employment contracts. That is what this is about. This bill tilts the playing field so that employers will get dragged into multi-employment contracts. Labour members love that. They love to think that employers will all have to follow what the large employer does. There is nothing for new small employers in this bill. 
LYNNE PILLAY (Labour—Waitakere) 
: 
 This bill is about fairness. It is about ensuring that parties do bargain in good faith. It is about providing security and certainty for vulnerable workers. It is about ensuring that the principles of the Equal Pay Act are applied. Where is the fairness in the lowest most vulnerable workers in our country losing their jobs one day and the next day being told they have their job back but their pay is being cut by 50c an hour? Where is the fairness in unions and workers doing their best to bargain in good faith for a fair collective agreement only to be met with a flat refusal or a fob-off from an employer? 
 Where is the fairness in situations where unions and workers have put much time and energy—and workers have paid a fee—to negotiate a deal to see it undermined by those hard-earned terms and conditions being automatically passed on to non-union workers? Where is the fairness when employers deliberately pay women less than men for doing the same job? The answer is that there is no fairness in those situations. The Opposition members who disagree—and I can see them doing it that poor sad little group—are behind the times. They are not in touch with workers workers’ families or the many employers who do support these amendments and the polls show it. 
I am proud to commend this bill to the House. In doing that I want to acknowledge the unions the workers and the many employers who are committed to ensuring that fairness and equity happens in our workplaces. The result of that is productive working relationships—something that party would not know anything about. Productive working relationships are good for business and good for polls. 
PETER BROWN (Deputy Leader—NZ First) 
: 
 There is much in this bill that concerns New Zealand First immensely. The explanatory note states: “To achieve this the Act acknowledges the inherent inequality of power in employment relationships and seeks to balance the interests of employers and employees through the promotion of unions and collective bargaining the obligation to act in good faith”. There will never be equal power-sharing between employees and employers as that seems to outline because basically the employer is responsible for virtually everything. He or she is responsible for the finances of the business the equipment the overall safety the employee well-being for marketing the business and for servicing the clients. It is just ridiculous to suggest that employees should have an equal balance of power in the running of a business. That is not to say that they should not have their concerns met from time to time but to suggest that they should be on an equal power-sharing basis with employers is not practical. 
The explanatory note continues: “The Bill seeks to reduce practical and behavioural barriers to collective bargaining through providing appropriate incentives for collective bargaining as well as provisions to discourage and penalise the deliberate undermining and avoidance of collective bargaining:”. Why should a union have a monopoly on collective bargaining? I asked that question of the Minister of Labour Margaret Wilson yesterday in the House and she said that it is traditional and there is no reason to change it. With due respect to the Minister that is weak. If it is good enough for the Australians to have the ability to bargain collectively without being in a union it is good enough for New Zealanders. If the Australians can do it so should New Zealanders be able to. 
The explanatory note goes on to state: “The Bill establishes a requirement that all employment agreements contain protective provisions describing what steps the employer will take in the event of any sale transfer or initial contracting out of business to protect affected employees’ interests. The details of such provisions are subject to negotiation.” I have some real concerns about that as has New Zealand First. Having said that I think Lynne Pillay made a good point about workers being sacked one night when the company is sold and re-engaged the next day for something less than they had been working for—in other words from time to time advantage has been taken of workers’ vulnerability. 
New Zealand First has long been on the record as having concerns about casual employment in this country. We have fought long and hard—ever since I have been in the House—to have that addressed. I have had experiences with a stevedoring organisation in Tauranga which overnight sacked people who had been there for years. They were told: “Don’t come Monday.” Indeed a good colleague of mine who worked his way up from planning clerk on the wharf at the Mount to operations manager of the company in the Mount and a senior role in the nationwide company was 1 week off 30 years’ service and was told: “Don’t come back.” When he got the telephone call he thought they were ringing him to tell him to come in for the reception they were putting on to celebrate his 30 years. He was told “Sorry don’t need you any more.” He had a reasonable-sized house which he had to sell. He was a grown man but when I spoke to him about that time he was just about in tears. 
There are legitimate concerns about the way some people are being employed in this country particularly at the vulnerable stage of their careers. Some people never rise higher than that. They are vulnerable their whole working lives and they have had treatment by some employers that is not good enough. 
New Zealand First is genuinely and realistically fearful of this bill but we believe there is a case for the vulnerable workers to have a better deal. We know of no other way of giving vulnerable workers the ability to air their concerns than to support this bill to the select committee stage. I cannot see if it remains as it is that we will be able to support it much further than that but we believe that low-paid vulnerable workers have a genuine concern and that they need to have a forum in which to air those views and concerns. 
Simon Power 
: Will you support it? 
PETER BROWN 
: We will support it to the select committee stage. We believe in listening to New Zealanders. That is part of the New Zealand First philosophy. I know that that does not count with the National Party. Its members all know better than Mr and Mrs Average New Zealander. 
Simon Power 
: That’s them not us. 
PETER BROWN 
: That is them over there is it? The member might be right. We have a track record of listening to the concerns of New Zealanders. 
Simon Power 
: Unless they’re immigrants. 
PETER BROWN 
: How can the member say that when I am standing here making this speech and I am New Zealand First’s No. 1 immigrant? I came here a long time ago. I have spent most of my time in this country and am very proud to be a New Zealander but I was born just north of London. Back to the bill: New Zealand First wants to see a fair deal for casual vulnerable workers. We are not talking about the high-flyers the people who can go from job to job and demand whatever they want wherever they go. We are talking about the— 
Hon Lianne Dalziel 
: MPs. 
PETER BROWN 
: I do not know whether an MP can go from job to job. Certainly I would give the Minister advice to hang on to that seat while she has it because nobody else will pick her up. We believe that it is timely that the concerns of low-paid casual workers are legitimately and fairly addressed. It is unfortunate that they have to be addressed in this bill. New Zealand First put a few amendments to the Employment Relations Bill when it came in initially but it was voted down by the Greens the Alliance which was in Parliament for a short time and Labour. They were not interested in casual workers at that time. Now they have apparently done some work and say they will address the concerns of these folk. I hope it is genuine but New Zealand First has reservations as to whether it is practical and whether it will work. 
We have major concerns with this bill about the way it will impact on business in the balancing of power between employees and employers. We think it is totally wrong and totally outside of good faith to say that people can have a collective contract only if they are members of a union. We think that is a breach of good faith in itself. We have concerns about low-paid and casual employees and we believe that sending this bill to the select committee will give MPs the chance to hear their cases first hand. At this point in time New Zealand First will support this bill to the select committee but I tell the Government not to count on us for long-term support unless the bill is amended significantly to be fairer and in the better interests of the country as a whole. 
SUE BRADFORD (Green) 
: 
 The Green Party is delighted that this bill aimed at reforming and improving the Employment Relations Act has finally reached the House. Although we have reservations about some aspects of the Employment Relations Law Reform Bill we are certainly in full support of its key aims and objectives. It is over 3 years since the Employment Relations Act passed into law and probably like others here today I remember 2000 as a period of parliamentary trench warfare. It was a year in which National ACT and representatives of big business acted as if the New Zealand economy would collapse as a result of the Employment Relations Act coming in while those of us on the other side of the House knew well enough that all we were doing was enacting a very mildly reforming piece of legislation that would do away we hoped with the worst excesses of the Employment Contracts Act era. 
I think most people realise now that the fears of the right did not come to pass. As has been shown in practice the Employment Relations Act has not even achieved some of the quite moderate goals for unions and workers that we had hoped for back in 2000. For example I thought the Employment Relations Act would sort out the whole question of the right to collectively bargain in that employers under the concept of good faith would have to seriously negotiate with workers and their representatives once the process was under way. I was quite naively surprised when union people began to tell me that some employers simply will not and do not negotiate dragging things out for months if not years. This is simply unacceptable and certainly was not the intention of those of us who supported the Employment Relations Act. 
When this unwillingness to negotiate is combined with the decline in union membership we begin to get some pretty shocking statistics coming through. For example bargaining is shrinking in the private sector whereby in 2002 to 2003 there was a 29 percent decline in employers who were party to a collective agreement. 
I am delighted that the new bill before us today aims to ensure that some of the loopholes employers have found will be closed. Among other things the concept of good faith is clarified and strengthened. Employers must bargain on all issues before them and penalties and remedies are strengthened for serious breaches of good faith. Underpinning this the bill makes explicit that the process of collective bargaining should result in a collective agreement unless there is a genuine reason not to. 
Another area of deep concern to us has been the question of freeloading. Again like others who had worked hard to achieve the Employment Relations Act I believed that the new Act would pave the way for a steadily increased unionisation of the workforce and start to turn back the clock on the massive de-unionisation that happened in the 1990s. However the reality has been quite different. As reported at this year’s biennial conference of the New Zealand Council of Trade Unions in New Zealand we still have only 21.3 percent of workers covered by collective agreements. At the same time 73.3 percent of the workforce overall remains un-unionised. 
In the private sector things have become even worse since the introduction of the Employment Relations Act and four out of the five largest unions in the private sector experienced a decline of membership in 2002. Only 12.4 percent of private sector workers are in unions and out of a group of comparable countries only the United States has a lower density of union membership than New Zealand. Those are telling figures. 
Part of the problem is that some employees continue to have an attitude entrenched in the Employment Contract Act 1990s that unions are simply bargaining agents. On top of this a number of workers know that they can get the benefit of collective bargaining by unions anyway so they do not even bother to join a union at all riding free in perpetuity on the backs of those who do care enough to pay their weekly fees. 
While that may please people like Simon Power Business New Zealand and the rest of the ACT and National parties it does not please those of us who believe that the only real way to address the ongoing imbalance of power between employer and employee is to maintain and develop strong effective trade unions. The Green Party is therefore pleased that this bill will put in place at least some measures that will assist in discouraging employers from continuing to undermine unions by freely handing out the benefits of the collective in ways that actively encourage de-unionisation. However we are concerned that the provisions aimed at stopping freeloading do not go far enough and we will be working closely with unions during the course of this bill to see what can be done to strengthen this aspect of the legislation. 
A third area where we are particularly pleased with the new bill is around employment relationship problem resolution. We look forward for example to seeing mediation services being made more flexible greater clarification around issues like what exactly constitutes unjustifiable dismissal in a personal grievance situation and a greater focus on any settlements that result from mediation being directed towards applicants rather than being a primary and ongoing source of income for a vast army of lawyers. 
Fourthly and perhaps the most significant issue for the Green Party in this review of the Employment Relations Act is around what was called the transfer of undertakings when we were working on the Employment Relations Bill and is now being called “protecting employees’ interests in change of employer situations”. During the first Employment Relations Bill process the Green Party fought really hard to try to keep the original protective clause 66 of that bill but unfortunately at that time Labour felt obliged to cave in to what looked to us like big-business pressure to withdraw that clause. Since then there have been several ministerial advisory groups working on this admittedly extremely complex issue. While it has taken a lot longer than we would have hoped it is great that the Government has finally come back to the House with a bill that includes a solid framework for employment protection in restructuring situations where the legal ownership of a business changes and the same work is being undertaken by the new employer. 
Provision is now made in this bill for a two-tier system with one lot of specific provisions providing a high level of guaranteed protection for categories of employees who are seen as particularly vulnerable such as workers providing cleaning catering and laundry services and with a second lower level of protection being afforded across the board to all other employees who are not part of that first group as defined in the bill. 
While at first glance this new framework may seem overly convoluted I believe that after all the negotiation in this area that has gone on over the last 4 years it is a well-worked compromise that goes a long way towards ensuring that in future people will have far greater protection when a business changes hands or work is contracted out. 
The Green Party is committed to equal pay and to equal pay for work of equal value—pay equity. Although the Government has seen fit to update the equal-pay legislation in this bill and we are pleased to support some improvements such as increased penalties for non-compliance we are very disappointed that it has not taken this opportunity to progress pay equity and begin the process to end wage discrimination in the workforce. With the Pay Equity Taskforce report due soon we will be discussing with the Government how any recommendations from this committee can be incorporated into this bill. 
Finally I would just like to touch on one particular aspect of the Employment Relations Law Reform Bill about which the Green Party does have really grave concerns. This relates to clause 35 which inserts a new section 100D into the Employment Relations Act and establishes a new procedure called the codes of employment practice. This new policy would allow the Minister of Labour to make codes about how the Act should be applied when industrial action is taken in the health sector. If this section of the bill is passed the Minister of Health will be able to decide after consultation what limits should be put on strike action in the interests of health and safety in both the public and private sectors. This is an extraordinary measure to be undertaken by a Labour Government particularly when one considers that private sector health employees will be affected. 
I have only to think of nurses and other staff at the Redwood Lodge in Rotorua and their current dispute where a private employer is putting high profit margins above the interests of very low-paid employees to wonder what on earth the Government’s intentions really are. Would it see the Minister of Health using section 100D to stop the Redwood workers striking for very moderate pay claims and improved staffing ratios? Will the Government seek to use this section to undermine the Nurses Organisation’s well-known plans for an intensive campaign for fair pay in 2004? 
The Employment Relations Act already contains provisions that require hospital workers to give 14 days’ notice of strike action and includes provision for mediation during that time. There are also legal limits on strike action being taken at the beginning of bargaining. These restrictions already make it more difficult for health workers to go on strike than was the case during all the years of the Employment Contracts Act. Section 100D of this new bill gives the Minister unusual power during times of industrial action by health employees. As the Minister is also ultimately responsible for the funding of health pay settlements this measure gives extraordinary control to someone who is both funder and de facto employer. 
I know that nurses and other health professionals are not saying that they do not care about health and safety during strike action; rather they believe as does the Green Party that legislation already adequately covers the issue and that voluntary codes of practice between employers and unions are a far better way forward than this kind of singular legislative control. 
The Green Party does support the Employment Relations Law Reform Bill before us this afternoon but I can assure workers and unions around New Zealand that we will be doing our best to improve this bill as it goes through the select committee process. 
PAUL ADAMS (United Future) 
: 
 I rise on behalf of United Future to oppose this bill. We are not convinced that we need this bill. The Prime Minister told the Council of Trade Unions conference this year that opponents of the Employment Relations Act must be very disappointed that the legislation had been successful and a stabilising influence on employment relations. Business groups say that the reason the Employment Relations Act has not turned out as badly as they thought it would is that all the controversial parts were dumped. If the law is working so well now then why does it need to be amended? The Government wants to review the Employment Relations Act because the law has not helped out its old mates the unions as much as it had hoped it would. 
Advocates of the Employment Relations Act hoped that the union density—that is the proportion of unionised workers in the labour force—would rise from the 17 percent it had sunk to under the Employment Contracts Act. According to a study by the Industrial Relations Centre at Victoria University union membership has grown by around 10 percent in the past 3 years but union density has remained virtually flat at around 20 percent since the mid-1990s. That stagnation has occurred despite the fact that under the Employment Relations Act unions have been given the exclusive right to collective bargaining. As the old Employment Contracts Act agreements expired workers either had to join an established union form one of their own or revert to individual agreements. Few employees have elected to join unions and those who have done so joined unions formed of members in one workplace. They are not affiliated with the Council of Trade Unions and tend to be regarded sceptically by the union movement. It is probably not surprising that employees in the public sector are five times more likely to be collectivised than their private sector counterparts. Slightly over half of all trade union members are employed in the public service. So this bill is all about trying to increase the influence of the traditional unions beyond the public sector. 
The unions claim that the reason they are not succeeding under the Employment Relations Act is that non-union employees free ride on the same terms and conditions secured by collective agreements. So this bill makes it a breach of good faith for employers to undermine collective bargaining if they pass on the same terms and conditions to non-union employees without presenting them with the opportunity to join a union. I think that in practice it will be very hard to establish whether an employer has undermined collective bargaining. Even the union leaders have said that the bill will not give them enough ammunition to stop freeloading. I wonder what would happen if an employer decided to pay non-union members more money than union members receive. He or she would be in trouble. That would be seen as an incentive for people not to join the union. That is the trouble when we get legalistic on this stuff. People need to be given a break and allowed to work one with the other as they negotiate things. So this clause is just a symbolic gesture to the Government’s supporters. 
But the bill does make it legal to give a bargaining bonus to members of a union. What wonderful words those are to a member of a union who negotiates a collective agreement. Can members remember when 6902 Public Service Association members at the Inland Revenue Department the Ministry of Social Development and Land Information New Zealand received a total of almost $4.5 million in bonus payments for successfully negotiating a new collective agreement? At the time we knew that United Future and other parties in this House questioned whether that was a breach of section 9(1) of the Employment Relations Act which prohibits preference on the basis of union membership. But only unions can negotiate collective agreements so at the time the agreement is made the one-off nature of the bargaining bonus effectively restricts it to union members. The average bonus received $712 would have covered each member’s union fees for the year. How nice that was! Fonterra and the unions tried to do the opposite of that and to get non-union workers to pay the fees of the union members because they had negotiated the collective employment agreement. But that has been challenged in court. The Minister must have been worried about the legality of the bargaining bonus for Public Service Association members because now we have a new clause in this bill that amends section 9 of the principal Act to state that it does not prevent a collective agreement from containing a term or condition that is intended to recognise the benefits of a collective agreement or the relationship upon which it is based. The Government knew that the bargaining bonus was dodgy so now it is covering it up. 
I turn to what I think is the most contentious part of this bill and that is the idea that in certain industries new business owners have to take on the staff of the old business. Even a political party does not have to take on the old staff if there is a change. 
David Benson-Pope 
: The National Party does. 
PAUL ADAMS 
: Not always. That is not true. Those who win a contract to provide a service will be forced to employ the staff of the outfit that lost the contract. People are people. 
Simon Power 
: That’s a very good point. People are people. 
PAUL ADAMS 
: That is a very good point. It was quite a revelation to the member. 
Simon Power 
: You were quick off the mark. People are definitely people. 
PAUL ADAMS 
: I was; I realise that. I am pleased to inform the member of that. He can put it in his memory bank now and he will be right. People are definitely people. Some have leadership ability and some do not. Some are soft-hearted and some are hard-hearted. Sometimes a business with a soft-hearted leader can go down the gurgler whereas a new person can come in take up the leadership responsibility pick up the business and take it on to greater heights. But under this legislation that person will not have the ability to deal with the business as it may need to be dealt with. He or she will be forced to employ the staff of the outfit that lost the contract. 
A new owner might have the chance to improve a failing company and take the business on for the very reason that he or she can do it at a lower cost. Lumping the new owner with the old employees will create an additional cost either in redundancy payments or in terms of a higher wage rate. What if the new owner has to make his or her own people redundant in order to make way for the old crowd? That will happen mark my words. This bill may make it impossible to sell a failing business. Instead the employer may just close it down. Where will that leave the workers? What if the failure of the business was in part due to incompetent staff? The bill talks about making the best use of existing talents but what if there was no existing talent? 
The decision to take on workers is one for a business to make. The Minister said in the House yesterday that skilled employees need to be seen as an asset of a business. But unlike plant and machinery a new owner cannot sell staff and get a return. I would have thought that the whole idea of contracting out for services is that the entire assets of the business are transferable and able to be dispensed with entirely if the person paying for the service is not satisfied. The explanatory note of the bill claims that compliance costs to business are likely to be relatively insignificant but anyone who takes on a new business or contract will have to factor into the price the increased cost of the liability of the old workers. 
 If we are to review the Employment Relations Act let us put in the things that are really needed—things like trying to stop employees from taking out unjustified dismissal claims when they are sacked just so they can cut down the stand-down period before they collect the dole. What about John Tamihere’s great idea? I can relate well to that man. He has a good head on his shoulders and he understands the reality of the world that we live in. He has a great idea of allowing small businesses a 1-month probationary period to assess new employees which he has been arguing for as part of the review of the Act. If those sorts of things were in this bill then we might have something different to say but we are not voting for this bill. 
RODNEY HIDE (ACT) 
: 
 This bill splits the House into those political parties that are looking to the future and those that are looking to the past—those political parties that want to support enterprise and a prosperous nation versus those that want to prop up the dinosaurs. Sue Bradford was quite right when she said that this is a bill to re-unionise New Zealand. When New Zealand workers are faced with a choice they do not want to be saddled with a dinosaur union the head honchos of which do not look after the workers. Unions do not produce the wealth of New Zealand. Working New Zealanders understand that and they are saying no they will not pay their fees to a union that does not deliver. That does not satisfy Labour Party members who like to have drinks with their mates in the New Zealand Council of Trade Unions and to discuss the brave new world. The New Zealand Council of Trade Unions cannot sign up members so the Labour Party aided by the Greens told it not to worry because Labour would put a bill into the House that would force people into the hands of the council. Labour has done that because the one thing this Government cannot do in the private sector is what it did in the State sector: pay people to be members of the union. That is what happened in New Zealand. This bill is about supporting dinosaur unions to shackle enterprise in New Zealand and the ability of New Zealanders to go ahead. 
Clause 8 shows that this Labour Government is given over to spin and dissimulation. I know that the Minister of Defence does not know what that word means let alone how to spell it but I cannot use the appropriate word here in the House that one would use in common parlance. Millions of dollars of taxpayers’ money have been paid to civil servants for joining the union—true or false? It is a true story. In fact in the civil service it is called compensation for joining the union. 
Simon Power 
: Compensation? 
RODNEY HIDE 
: Yes it is the payment of civil servants’ union fees. They get $400 $700 up to $1000 and in some cases as much as $1200 simply for joining the Public Service Association. Is that true or false? It is a true story. It happened in the Inland Revenue Department in Work and Income in the Ministry of Agriculture and Forestry and in two or three other Government departments. That is clearly illegal under section 9 of the current Act because it discriminates against workers who are not members of the union. 
The Minister of State Services came down here to the House and said those payments were all legal and consistent with the Employment Relations Act. Yet every employment lawyer that I spoke to said that the Minister was talking through a hole in his head unconnected to his brain. 
Simon Power 
: Not an easy thing to do. 
RODNEY HIDE 
: If one is Trevor Mallard it is very easy. The member does that every day without even thinking about it. Members should just ask the teachers and the parents of New Zealand. In fact the member’s mouth is so unconnected to his brain that he got a psychologist in the Ministry of Education to write to all the schools of New Zealand saying they should not allow their children to come along and heckle him because that made him look bad. That is what he did; Trevor Mallard was scared of school pupils. Trevor Mallard stood up in this House and said no those payments were quite consistent with the Employment Relations Act and that there was no problem. Our State Services Commissioner who is paid over $400000 a year—New Zealand’s top civil servant—said that the payments were all within the law and he had no problem with them. But the State Services Commissioner took his direction from the Minister of State Services Trevor Mallard the bully boy of New Zealand politics and he was scared of getting the boot. 
Then suddenly we see in this bill that section 9(1) of the Act is to be changed. Clause 8 states that the following subsection will be added to section 9: “(3) To avoid doubt this Act does not prevent a collective agreement containing a term or condition that is intended to recognise the benefits—(a) of a collective agreement: (b) arising out of the relationship on which a collective agreement is based.” The Government had to do that because it has been handing across millions of dollars of taxpayers’ money straight to its mates at the Public Service Association. It goes to the workers first—all they have to do is to sign a little form that sets up an automatic payment to the Public Service Association. Therefore taxpayers have had to pay money to the health system to the education system and to the Ministry of Agriculture and Forestry for border security—to all those things—not for services but to pay for a Public Service Association that civil servants themselves would not sign up to unless they were paid for doing so. 
How useless a union is that? People do not want to join the Public Service Association. They want to join it only when they are paid to do so. They have to be subsidised and on top of that paid to join it. Is it any wonder then that the number of civil servants who are signed up with the Public Service Association is growing yet in the private sector union membership lags well behind that rate? Is it not clear from this bill that what was being done was illegal? If it had been legal we would not need to change the Act would we? 
Simon Power 
: We would not need the new clause. 
RODNEY HIDE 
: We would not need the new clause—the one that Trevor Mallard said we did not need because the payments were legal. Our top civil servant the State Services Commissioner Michael Wintringham said the payments were legal but now we have to change the Act in order to remove any doubt. Well Dr Don Brash of the National Party said the payments were illegal Rodney Hide of ACT said they were illegal the United Future party said they were illegal and now the Labour Party agrees with us on that because the Government is changing the Act. Yet Labour is just not big enough to agree with us that the payments were illegal. 
The Labour Government does not understand what it is that drives up wages. Why is it that we are now paid more than our grandfathers and grandmothers were paid 50 60 or 70 years ago? Labour members think that is because of the union movement. No I am sorry to say it is because we are more productive. We have been invested in in terms of plant and capital and we can produce more. We no longer use shovels; we use hydraulic loaders and the like. Being invested in makes us more productive. Michael Joseph Savage understood that. It is investment that drives up wages and conditions not the unions. 
There is one final thing that this Government does not understand and this has also been alluded to by other speakers. Let us imagine that a person is contracted to a business and is making a hash of it. If another contractor comes along who is much more efficient the efficient contractor may compete for the business and win it. Is that not the way that the capitalist system works when a contractor is not up to scratch? But this bill requires the successful contractor to take over the unsuccessful contractor’s workers on the same terms and conditions that they already had. What is the point of that? It disadvantages the efficient workers and the efficient contractor to the benefit of the inefficient ones. Is that a picture of the sort of economy that this Labour Government wants? I do not think so. But Labour is so held in the sway of its 19th century view of the workplace— 
Darren Hughes 
: The 20th century! 
RODNEY HIDE 
: I tell Darren Hughes it is a 19th century view—and is so held in the sway of its union mates in the Council of Trade Unions—[ 
Interruption 
] 
Hon Lianne Dalziel 
: The ACT party—the Flat Earth Society—I mean it’s a dinosaur! 
RODNEY HIDE 
: Is that not great? The Minister of Immigration calls out that the ACT party which believes in low taxes and a free labour market is the Flat Earth Society. But over there on the Government benches supporting the dinosaur unions in New Zealand is somehow— 
Madam DEPUTY SPEAKER 
: The member’s time has expired. I call Winnie Laban. 
RODNEY HIDE 
: I raise a point of order Madam Speaker. I am going to respond to those points. 
Madam DEPUTY SPEAKER 
: The member will be seated. 
RODNEY HIDE 
: OK then. 
Madam DEPUTY SPEAKER 
: The member will sit down in future when his time has expired. I call Winnie Laban. 
RODNEY HIDE 
: I raise a point of order Madam Speaker. I will sit down when my time has expired as I always do. But I also expect that if someone yells out right at the end of my time and thinks he or she can get a free hit that will not succeed particularly when it comes from the Minister of Immigration who is making a complete hash of her portfolios and now thinks she is an expert in the labour market. 
Madam DEPUTY SPEAKER 
: The member will be seated. That is not a matter for a point of order. 
LUAMANUVAO WINNIE LABAN (Labour—Mana) 
: 
 Kia ora talofa lava and warm Pacific greetings. I am very very proud to be a member of this Government. New Zealand is in good economic heart and it is a very fair and decent society. The principles behind the employment relations legislation are about participation opportunity dignity and fairness. I am very proud to stand and support this legislation especially the change-of-employer situations. Special protection will be given to specific groups of employees who are particularly vulnerable in change-of-employer situations and who lack effective bargaining power such as our cleaners and our food service employees. These employees finally will be treated with some dignity. They will have the right to choose to transfer to a new employer on their current terms and conditions of employment. I am so proud of that clause and we need to say thank you to and acknowledge not only the employers and the business people but the workers and the unions who all contribute to a strong economy and a decent society with a heart. Other employees will also be given protection through a requirement for their employment agreements to contain an employee protection provision. I thank the Minister of Labour the Service and Food Workers Union the employers and our New Zealand society. 
SIMON POWER (National—Rangitikei) 
: 
 I remember vividly sitting in this House when the Employment Relations Bill was passed. I remember the Hon Lianne Dalziel leaping to her feet and applauding and hugging as I recall on that day when the Employment Relations Bill was passed. I remember members on this side of the House saying at the time that that piece of legislation was flawed and that it would not be the last time we saw the legislation come back to the House for further amendment. 
Upon the beginning of the first reading of the Employment Relations Law Reform Bill I consulted the Clerk about how many amendments there have been to the Employment Relations Act since it came into force in the year 2000. As predicted by members on this side it is an imperfect piece of legislation. [ 
Interruption 
] Mr Hide will be interested to know that this is the twelfth amendment to the Employment Relations Act signalling what we on this side of the House knew all along—that is that the original Act was never going to work. 
 Part of the reason that the House is being required to look at this bill today is precisely the reason that Mr Hide made out—that is workers have not chosen to flock back to the unions with the passing of the Employment Relations Act. Workers have decided that other bargaining agents including funnily enough themselves are capable of negotiating agreements with their employers. Union membership has not increased in the way that the Council of Trade Unions and other unions would like. That is because this country has grown up and employees and employers are able to sit in a room together and make constructive decisions and agreements about how their working relationships are to be conducted. That has not made the Government’s backers happy at all. That is why we are seeing this piece of legislation in the House today. It is another step on the line back to compulsory unionism. Who does one push out there to sell this to business? Good old Margaret Wilson will step up to the plate and take the employers on. She is a list MP. It does not matter to her. She has no constituents to answer to and she is capable of being pushed out there by the Prime Minister to sell these very unpopular measures when workers themselves have chosen not to go back to the unions. That is telling in itself. 
I want to spend a little bit of time looking at some of the detail of this bill. I find myself not saying this easily but I will anyway—I actually agree with Sue Bradford. That is disturbing on many levels but on the first level is the fact that what Sue Bradford said about the fact that the only people who will benefit from this piece of legislation are lawyers is exactly right—so there is some good in it! Lawyers will be the only people who benefit from this legislation. Let me just take Government members through as to why that is the case. Whilst members opposite try to pass legislation that will allow for continuity of employment let me just tell members opposite how the sale and purchase of businesses works. Usually on a sale and a purchase agreement for a business the purchaser and vendor would agree by way of a clause inserted in that agreement as to how they would deal with employees at the point of sale. I have to say that in my time in drafting those documents and being involved in those transactions 95 percent of staff passed with the business to the new purchaser. There was never any problem with that. What we will see now with the provisions in this legislation is lawyers inserting a different clause. 
I just say to Winnie Laban whose goodwill and genuine interest in these matters I have never doubted that what will happen is this: a new clause will be inserted by lawyers in the sale and purchase of business agreements and that will be to liquidate and to wind up the businesses at the point of sale and a new business will be formed on the date that the settlement of the sale of that agreement occurs and that will be designed purely to get around the provisions of the legislation that is just about to be enacted. Whilst members opposite might think that the intentions are good let me just assure them that there will always be ways around these types of things. When people start to insert clauses like that into sale and purchase agreements for businesses who misses out? The workers miss out when those sorts of businesses and those sorts of clauses are included in those agreements. I have to say that when parties to a contract are forced to include clauses or legislation that are being moved by the Labour Party now the tighter the fist gets clenched around that contract the more it will squeeze clauses out the other end to deal with these issues. I warn members opposite that the people who will suffer as a result of these new clauses being included in agreements like this will be the workers. It might not be the unions but it will be the workers. 
I want members opposite to think about this. Margaret Wilson said in her press release about this bill coming to the House that there would be no return to compulsory unionism compulsory arbitration or the national awards system. She said: “The approach remains one of free choice flexibility and fairness to all.” She then went on to say: “will provide appropriate incentives for collective bargaining.” How on the one hand can Margaret Wilson talk about the fact that there is free choice around entering into these employment relationships and on the other hand in the purposes clauses of this bill blatantly say: “This legislative proposal will provide appropriate incentives for collective bargaining.” Where is the free choice there? There is no free choice there. Incentives do just as they sound and will drive workers into a situation where they are not able to exercise free choice at the point of employment. I was unaware until Paul Adams mentioned it that John Tamihere was in favour of a grievance-free period at the start of an employment relationship. I have to say that I agree with John Tamihere on that because it is those types of clauses that encourage businesses to employ immigrants young people and people over 55 and to give them a trial. Those types of clauses give people the first step into the workplace to see whether they are any good—they give them an opportunity they would not otherwise get. 
The thing about employment law from this Government that makes me really wild is that it may or may not depending on one’s interpretation do things to protect workers who currently have jobs but what about those workers who are looking for jobs? What about those workers who have not yet got jobs? This legislation does nothing at all for those people. I say to members opposite that this legislation will be nothing but trouble. We will know how successful this legislation has been when 6 months after it is introduced we see a whole lot more Mercedes-Benz cars on the roads and we will know what is going on there. It will not be the workers driving them; it will be the lawyers. This legislation will create so much controversy and so much disruption in the workplace that only one group of workers will benefit from it and that will be the lawyers. Members opposite should think closely and carefully about what they continue to do to the ability of two adult people to contract at a point on arrangements and terms that suit them both. Call me old-fashioned but actually the union is not a party to an employment agreement. 
Hon MARK BURTON (Minister of Defence) 
: 
 In response to that member I remind him of one thing. The unemployment figure in this country is the lowest that it has been in a generation. That is the result of this Government’s policies. I read for the member a portion of the explanatory note: “Fair and productive employment relationships are an essential ingredient in developing a more innovative economy while protecting the more vulnerable in society.” That is what this bill is about. That is why I am proud to support it. 
JOHN KEY (National—Helensville) 
: 
 There is very little indeed that is more blatant than this bill. This bill is designed for one reason alone and absolutely nobody in this country should be under any illusion what that reason is. This bill is all about building union membership. That is what it is about. 
The Government has put out Margaret Wilson as the Trojan Horse to build union membership for one reason alone: union membership stands at only 12 percent in this country and the unions are not happy. The Government caucus is full of union representatives and they have looked at the numbers. They had their first shot when they restructured the Employment Contracts Act but they have said that that was not good enough that they should bump up the numbers and build up the union movement in this country and that one way to do that is to get Margaret Wilson to restructure the Employment Relations Act. That is what the Government is doing today— 
Simon Power 
: For the 12th time. 
JOHN KEY 
: It is a disgrace. The Government is doing this to build up the unions so that they can get more fees to prop up what is nothing more than an ailing Government that is about to get booted out in 18 months’ time. Government members might laugh but we will see who has the last laugh when employers get a load of this claptrap. 
When Margaret Wilson tabled this bill in the House she said she was just as concerned for the 80-odd percent who are not covered by a collective agreement. She was concerned all right—she was concerned about how she could get them on a collective agreement! That is her agenda. That is where we are going with this legislation. It is absolutely no different from what we saw last night when Trevor Mallard introduced the State Sector Amendment Bill and with all the arrogance of this Government delivered the same bully-boy tactics that the Government is using to try to push through this legislation. I simply have this to say to Margaret Wilson: if this was the moon—and frankly sometimes I wonder what planet Margaret Wilson comes from—and Margaret Wilson was the first woman to walk on the moon as Neil Armstrong was the first man to do that 34 years ago as she was planting the New Zealand flag on the moon she would simply say: “One small step for the employee; one giant leap for the unions.” That is what this bill is about. 
Inch by inch this Government will drag us back to the 1970s and the 1980s. They were not happy times in industrial relations in this country. I may be young enough still to have my youthful looks but I remember the days of strikes at Kawerau and Kinleith. I remember the days when productivity was driven down to the point where New Zealand had a growth rate of half a percent because the unions held this country to ransom. No one should forget about that. I remember the days when the inter-island ferries did not operate because people were on strike due to there being no chocolate biscuits. That is what the unions did for those people and GDP grew at half a percent. 
Simon Power 
: Cold meat pies. 
JOHN KEY 
: And no chocky biscuits. The ferries were on strike and no one went anywhere. The strikes always happened around Christmas and Easter. There was no respite for those New Zealanders who wanted to go on holiday because the ferries went on strike. Inch by inch that is where we are heading with a bill that is designed to give the unions more power and be very very harsh indeed on employers. 
I simply ask what that will do for job creation in this country. What will that do for small businesses when they want to take on new staff? What will that do for the most vulnerable workers whom Labour Party members argue so wilfully they are there to represent? Absolutely nothing! This is robbing the food off their table—make no mistake about that. The very people who will be affected by this bill will give absolutely no thanks at all to this hapless Labour Government. 
Yesterday the OECD produced its 159-page report on New Zealand. It released its report and had these words to say about the labour market. I hope the Minister of Labour is paying attention. 
Rodney Hide 
: The OECD is a right-wing plot according to them. 
JOHN KEY 
: A right-wing plot it may be but it said that labour market flexibility should be preserved. That was the report’s opening line. The next line was: “In recent years there has been a clear trend towards greater rigidities higher labour costs and there are further such changes in the pipeline.” If members want to deliver—[ 
Interruption 
] 
Let me take the member up on that. Yes unemployment is low. The OECD said that unemployment is low and growth is high solely because of the policies of the 1980s and the 1990s and absolutely nothing that this Government has done has encouraged that—not one thing. It has increased taxes increased compliance costs and increased rigidity in the labour market. The OECD said that growth in New Zealand per capita is going down. Make no mistake about it: we are talking about a basket-case economy if we leave this hapless Labour Government in office for too long. So Labour members should not be too smug about it. A low exchange rate competitive prices and a whole lot of migration do not make them magicians. Even if they believe their own press releases it does not work that way because the OECD is a bit smarter than their press releases and it has worked out what is going on in New Zealand and it is bad bad news. 
I want to look at some of the particular parts of this bill because they are very disturbing indeed and employers will be very concerned about their provisions—in particular the issue related to collective bargaining. One of the provisions requires an employer to attend at least one meeting when a multi-employer contract agreement is to be reached. It sounds innocuous enough but when it is tied to the good-faith provision I think it is very important that people understand exactly what “good faith” means in this legislation. “Good faith” in the bill means that parties bargaining for collective arrangements must attend 
at least one meeting unless there is a genuine reason not to do so. Parties to good-faith arrangements are to be “responsive communicative and supportive”. 
It is as my colleague Mr Simon Power said nothing short of a bonanza for lawyers. This is not the kind of legislation that will make employment relations go forward. It is a bonanza for lawyers and those wealthy and highly paid lawyers in Queen Street are licking their chops as this Labour Government delivers them a complete mishmash of legislation that will drive New Zealand back to the 1970s. One of those lawyers the very esteemed Rob Towner a partner at Bell Gully and a specialist in employment law at least had the guts to say this: “There is nothing to suggest that the employer has discharged its obligations by simply going to the first meeting. They will be held around the table to negotiate a whole lot of collective arrangements even if it makes no sense for them to be there for fear of being fined.” Individuals and companies will be whacked with a $5000 to $10000 fine if they are seen to be in breach of their good-faith arrangements. So this bill will do nothing for growth in New Zealand. 
Before my time expires I want to touch finally on the issue of business restructuring. It is important to understand the provisions for business restructuring because they are very important indeed. They will do one thing and one thing alone for businesses in New Zealand and that is not grow them. So while Labour members are out there telling the people of New Zealand that they have their innovation and growth strategy I suggest they get it out of the bottom drawer along with their credit card dust them off and have a look at what they were telling the people of New Zealand while they were trying to bluff their way into office. It was not listed on that credit card that they would make goodwill evaporate in businesses up and down the country but that is what this employment relations bill is going to do. Government members as I stand here today are very quiet because they know as I know that this is a terrible step back for New Zealand. 
Earlier someone mentioned the position of union membership in the United States of America. Let me just tell members that every man woman and child in America has a standard of living almost double that of people in New Zealand and if this Government or any Government wants to deliver a Christmas present to the people of New Zealand then it should give them more money and more opportunity but it should not give them this rubbish that has been designed in a bathroom somewhere in this fair building. 
JILL PETTIS (Labour—Whanganui) 
: 
 I always love it when we have debates in this House about industrial relations because they show how far removed the National Party is from reality. National members should get out and see the real world during their 4 or 5 weeks’ holiday—and they will vote against that bill as well. Last night in the debate on the Education (Export Education Levy) Amendment Bill which we are going to go onto again in a moment Simon Power who spoke just before was actually advocating paying striking workers. It just goes to show how removed National members are from reality out there in the real workplace. They are only ever used to being the masters in master-servant relationships. They would not have a clue what it is like in a role reversal. This is a very good bill. It is good for vulnerable workers. Let us get on and do the best we can for them and get it passed quickly. 
Madam DEPUTY SPEAKER 
: There will be no comment from the gallery. 
A party vote was called for on the question  
That the Employment Relations Law Reform Bill be now read a first time. 
Ayes 76 
New Zealand Labour 52; New Zealand First 13; Green Party 9; Progressive 2. 
Noes 44 
New Zealand National 27; ACT New Zealand 8; United Future 8; Independent: Awatere Huata. 
Bill read a first time and referred to the Transport and Industrial Relations Committee.