HAT HAPPENS NOW?

  • Max Bradford
Labour

INDUSTRIAL RELATIONS CONFERENCE

THE POLITICAL CONTEXT OF INDUSTRIAL RELATIONS
When I spoke to this conference last year, I imagine many of you were contemplating the end of the Employment Contracts Act as we knew it at the time.

Certainly my parliamentary colleagues in the Labour Party and the Alliance were - with unrestrained relish.

Last year the Act was in peril of abolition -

either at the hands of a private members bill, given the government was in the minority throughout the last two years, or, if the coalition building process had produced a left-of-centre government.

At the very time Australia was starting to reform its industrial relations framework to introduce greater flexibility, there was a real danger New Zealand would slide back into a discredited labour market regime.

We had to move ahead, not backwards.

Instead of preparing ourselves for an increasingly competitive future, we were facing the resurrection of the corpse of outdated industrial relations policy promises, which had railed so miserably 15 years ago.

But we survived, and so did the Employment Contracts Act.

This year the future of the Act is assured - at least for the next three years.

There is virtually no chance a parliamentary majority can be cobbled together to overturn the Act.

Only the Alliance is committed to repeal the Act - they have 13 seats of the 120 in Parliament.

There is solid parliamentary support with National, NZ First, ACT, and United all supporting the Employment Contracts Act pretty much as it is.

70 of 120 MPs will vote for the Employment Contracts Act if there was to be a survival vote in the House - 58 percent of the Parliament.

The proposals put forward by the Alliance and the Labour Party during the 1996 election had enormous implications for the future of the New Zealand economy as a whole, and in particular for the industrial relations framework which is our focus today.

In my view, there is little chance of the Employment Contracts Act being repealed by a future Parliament.

By the turn of the century, the Act will have been in force for nearly a decade.

The practices and habits of a centralised system will be long gone, after the retirement of the industrial practitioners of the 1970s and the 1980s, and I daresay Ministers of Labour who were familiar with the old system.

By then, I expect there will only be a few ideologically driven trade union secretaries and university lecturers arguing whistfully for the good old days.

THE COALITION GOVERNMENTS POLICY CONTEXT
The Coalition Agreement announced in December made it clear that the Employment Contracts Act is here to stay. We firmly believe it is one of the crucial pillars to New Zealands sustained economic recovery, and even more importantly to the countrys future.

In the governments Coalition Agreement, there is a statement of general direction which says:

The industrial relations environment desired by the parties is one based on fairness, flexibility and neutrality, Recognising that the environment plays an important part in achieving high sustainable economic growth rates in New Zealand.

Within this statement, the Coalition Government is committed to improving several important areas of the present industrial relations framework.

Proposals in these areas are consistent with Act and our current framework.

They will re-inforce and enhance the principles underlying the Employment Contracts Act.

Before I discuss these proposals I want to look at why the principles of freedom and choice, and the Act itself, continue to form the core of the governments industrial relations policies.

Through the Employment Contracts Act the government quite explicity aimed to fundamentally change the very nature of industrial relations in this country.

These changes are now firmly embedded -

voluntary unionism
contestability of bargaining agents
choice of employment contract
comprehensive access to personal grievances
flexibility of coverage of contracts
workplace rather than occupational bargaining
While some may debate the way forward, there is no will on the part of ordinary employers and employees to go back.

Choice and freedom in industrial relations have become integrated in the everyday expectations of employers and employees.

The idea that the people most closely concerned with a particular workplace should be able to agree to the kinds of working arrangements that best suit them is no longer a radical idea.

Employees - quite rightly - now expect to be able to choose their representative in matters to do with their employment.

If they choose to belong to a union they expect to be able to decide which organisation will best represent them.

These are very basic rights and freedoms for which New Zealanders had to wait until the last decade of the twentieth century.

THE ECONOMIC CONTEXT
How have employers and employees used these new freedoms?

New jobs have been created - 240,000 since December 1991. 72% of these jobs were full-time and 28% part-time.

Unemployment has fallen from 10.7% in December 1991 to 5.9% in December 1996.

Business commentators and people in business of all kinds see the employment contracts act as being in the very centre of government measures which have successfully created the right kind of environment for long-term growth and prosperity for New Zealanders.

New Zealands economy in 1997 is a very different proposition in both domestic and international terms than it was in 1990.

For a start, in volume terms the economy is about a fifth larger.

It took us 6 years to do what used to take a decade or more.

The right government policies - many started by the Labour government in 1985 - have been a precondition of all the successful changes envied by many around the world.

The Employment Contracts Act, the Reserve Bank Act, the Fiscal Responsibility Act, and a number of other key initiatives were needed to give people freedom to make the right decisions to create growth and jobs.

TAKING STOCK
But the time is now right to take stock of what has been achieved and to position oyurselves to take advantage of an increasingly competitive world economy.

That world economy has caught up with many of the policy initiatives we took in the late 1980s and early 1990s and in some cases has passed New Zealand.

We used to be ahead in telecommunications deregulation and competition.

We are no longer.

New Zealand used to have amongst the lowest electricity and energy costs in the OECD 8-10 years ago.

We dont any longer, as our competitiors have implemented more far-reaching competition in their energy sectors than New Zealand has in the last 5 years.

Australia is lowering its cost structure rapidly to meet competition from the Asian economic giants.

In part, the steady flow of middle-range companies to Australia in recent months is evidence of improving cost profiles for business across the Tasman.

The economies of scale of being 5 times larger than New Zealand are becoming compelling, and unless we can build solid competitive bridges for New Zealands Australiasian businesses we could well see more of this trans-Tasman flight.

In this respect, the very significant progress of far-reaching labour market reform in Australia is a real threat to our relative competitiveness.

At the general policy level, as well as at the business and farm level, we have to sharpen our pencils and move to a new plane of competitivenss.

That means government has to take its unnecessary costs off the shoulders of business and taxpayers.

The government must ensure competition penetrates as pervasively as possible so the benefits of an appreciating dollar reach consumers and businesses.

So wearing another of my portfolio hats - Energy - I will be pushing, prodding, cajolling, and if necesssary using the powers available to the government to make sure the competition happens, and cost pressure is taken off business and agriculture.

We have to find ways of reducing other costs such as ACC levies.

It will have to be a joint effort between business, employees, and the government.

Business must make their workplaces safer so accidents dont happen in the first place. Cut the costs up front.

Employees must own their own safe work practices and not just leave it to the boss.

And the government must run the leanest, but not the meanest, accident compensation scheme possible that rewards businesses and employees with the safest workplaces, while penalising the unsafe.

This is a general rule for the next stage of improving the countrys international competitiveness.

The incentives and disincentives will have to be more transparent.

It will be much harder finding the next 5 or 10 percent of productivity improvement, than it was finding the 10 to 20 percent common in the first wave of reform in the late 1980s.

Business and agriculture will, if it is to prosper in the next few years, have to focus - and focus - and focus on productivity improvement rather than pushing for fallacious panaceas like devaluation of the dollar.

The government has a responsibility to ensure the rate of change is manageable.

Sometimes this is easeir said than done, as the key interface variables between New Zealand and the rest of the world - interest rates and the exchange rate - are often at the mercy of other countries economic management.

But the general message is that every public and business policy component will need re-examination over the next year or two.

THE FINE TOOTH COMB AND THE EMPLOYMENT CONTRACTS ACT
It is no secret that I have for some time believed there were some areas of the Employment Contracts Act where fine-tuning is needed to ensure the orginal intention of legislation continues to have maximum effect.

There are some signs the combined effect of the Employment Tribunal and Employment Court decisions, as well as business practices flowing from these decisions and the impact of some pieces of unreconstructed legislation, are beginning to impact on employment flexibility and employment prospects.

I want to emphasise that the Coalition Agreement as a whole - and that part of the agreement dealing with industrial relations - sets out a three year programme of work.

It would be neither practicable nor desirable to attempt to deal with all the proposals immediately.

The government is at present working through the various initiatives in the Coalition Agreement to develop an implementation programme, taking into account funding, timing and sequencing factors.

In the industrial relations area a start has already been made.

The increased - and controversial - minimum wage announced in the agreement has been put in place.

On 1 March the minimum wage for adult employees increased to $7.00 an hour.

At the same time the youth minimum wage increased to $4.20 an hour to maintain the 60 percent relationship with the adult rate that has been in place since the introduction of the youth rate.

As I clearly explained when announcing the minimum wage increase, the review of youth rates outlined in the Coalition Agreement will proceed in the course of this year.

The increase to $4.20 an hour reflects the change to the adult rate and in no way prejudges the outcome of the review of youth rates.

The new rates represent a significant increase in the minimum wage and it will be important to have sound research on the impact.

I have asked the Department of Labour to commission that research, and perhaps we can find some conclusive evidence of the employment impact of a significant rise in the minimum wage.

I would like now to briefly mention some of the other elements of the coalition agreement.

BRINGING CLOSELY RELATED LEGISLATION SUCH AS THE HOLIDAYS ACT AND WAGES PROTECTION ACT UNDER THE UMBRELLA OF THE EMPLOYMENT CONTRACTS ACT
The agreement proposes to bring other employment legislation such as the Holidays Act and Wages Protection Act together under the umbrella of the Employment Contracts Act

This will first necessitate a careful review of each act.

There is some employment legislation such as the Holidays Act where reform is much needed. I believe we now have the parlimentary support to make progress in this area.

It will be against the background of keeping the present statutory entitlements to holidays intact.

The Court of Appeal has over the past few years clarified a number of areas.

Yet is fair to say that many employers and employees experience difficulties applying its provisions to modern day work practices.

It is not sensible to have to take every slightly different situation through the whole court system before getting a definitive answer on holiday entitlements.

That is our job as legislators, after full and appropriate consultation with the public.

FAIR BARGAINING
The agreement proposes to introduce fair bargaining to promote compliance with the underlying principles of the Act.

This includes describing the obligations to respect the choice of bargaining agent and not undermine the bargaining process by bypassing the agent, which have been underlined by various court decisions since the Employment Contracts Act was passed.

Fair bargaining will reflect the New Zealand experience and is not to be modelled on United States or Canadian concepts of Good Faith Bargaining.

CODIFICATION OF PERSONAL GRIEVANCE COURT DECISIONS
The Coalition Agreement proposes to review whether and how court decisions on personal grievance applications can be codified into legislation.

You will remember the Employment Contracts Act extended coverage of personal grievance procedures from only union members under the old labour relations legislation, to every member of the New Zealand workforce.

That is from about 400,000 peopole, to well over 1.7 million now.

Personal grievance applications have consistently made up the bulk - about 78%- of applications to the employment tribunal.

About 90% of personal grievance applications relate to the dismissal of an employee.

Since 1991 considerable additional resources have been allocated to the employment tribunal to enable it to help employers and employees resolve their disputes.

The proposal in the Coalition Agreement is intended to investigate whether the obligations of employers and employees towards each other in the event of a grievance can be made more explicit within the legislation itself.

This will include issues relating to fixed term contracts and recent court decisions which have fundamentally undermined the ability of willing parties to conclude fixed term contracts.

At present many of the procedural and other requirements are to be found scattered through various court decisions.

Our aim is to seek to further encourage employers and employees to resolve disagreements themselves.

Parties who have a good understanding of precisely what is expected of them when dismissal becomes a possibility, for example, are better equipped to deal with the situation.

I am aware that concerns about the obligations of employers in particular when dismissing an employee have been the subject of much debate.

But I am duty bound to ensure the interests of employees are fully protected as well, against the deprivations of the unscrupulous employer.

PROMOTING THE RIGHTS AND RESPONSIBILITIES OF EMPLOYEES AND EMPLOYERS
The Coalition Agreement also proposes looking at other, non-legislative, ways and means of proactively promoting the rights and responsibilities of employers and employees.

Information is one of the most effective ways of promoting compliance with legal obligations.

Enforcement activity such as prosecution will unfortunately continue to be necessary.

There is nonetheless potential to reach more employers and employees about their rights and obligations.

Since 1991 the Labour Inspectorate of the Department of Labour has undertaken a range of activities with this aim.

These include seminars, pamphlets and setting up an information centre in Auckland with an 0800 information line.

In 1996 the industrial relations info-line had 163,300 enquiries from employees, employers and other members of the public.

This a clear indication of the demand for more information about employment related matters.

I believe that this is undoubtedly a good venue to point out that there is also a real need for other organisations to actively promote information, many of whom will doing it already of course.

But constant reinforcement is vital to a better understanding of the Employment Contracts Act, its rights as well as its responsibilities.

I have asked the Department of Labour to prepare proposals to prepare young people in particular for the world of work, and ensure they have a good understanding of the Employment Contracts Act.

It is crucial that the underlying principles and original intentions of the Employment Contracts Act are not undermined over time.

It may be the case for example, that specific legislative provisions in the Employment Contracts Act were not sufficiently explicit about Parliaments intentions when the Act was passed.

This lack of clarity has led to some court decisions clearly inconsistent with the principles of the Act.

You might say this is a charitable interpretation of a court seen by some as judically active, but I could not possibly comment.

We must also have regard to the fate of a number of the Employment Courts decisions before the Court of Appeal.

The Coalition Agreement proposes a study of the Employment Court decisions, which will be considered in light of the parliaments intentions at the time of passage of the Act.

If necessary, the Employment Contracts Act will be clarified for the Courts benefit.

It will then be necessary to consider how these intentions can be clarified in statute in such a way as to ensure that the underlying principles of the Employment Contracts Act are kept intact.

At the most extreme end of the debate, there are some who would argue that there is no need for a separate employment court, given that the Courts primary role is to review the legal interpretations of the Employment Tribunal rather than hear cases ab initio.

There is undoubtedly more currency for this view than when the Employment Contracts Act was making its way through parliament in 1991.

In 1991, the Labour select Committee was asked by the Minister of Labour at the time to recommend whether or not there should be a separate jurisdiction for employment law.

In the event, given the sweeping changes proposed by the Employment Contracts Act at the time, the Select Committee reported the bill back with the Employment Court/Employment Tribunal option.

I imagine the review will reveal whether the landscape of the labour market has moved in a way to support another look at the institutional arrangements in force at the moment.

IS EMPLOYMENT CASUALISATION BEING USED TO UNDERMINE COMPETITION IN SOME INDUSTRIES, (EG WATERFRONT)?
This matter is of more local concern in some sectors, but the government is committed to investigate whether casualisation is being used to defeat the purposes of the Commerce Act or the Fair Trading Act.

EVOLUTIONARY PROGRESS, WITH FOCUS
Taking the Coalition Agreement as a whole I am confident these initiatives will help many New Zealand workplaces focus on becoming more productive and more competitive.

We have been world leaders in our economic reforms and our industrial relations system has been an important, if not crucial, component of making them work.

The proof is in the results, not the rhetoric.

Unemployment is down.

Employment is up by hundreds of thousands.

Sustainable growth for 6 years is unparalled in our recent economic history.

Real incomes are rising in conditions of low inflation.

This advantage will not be maintained unless we continue to make the most of our strengths.

Nor will it be maintained if we ignore the need to undertake another round of change, of reform, and of re-engineering our businesses, our farms, and our attitudes.

The Employment Contracts Act is part of that round of change too.

I want to conclude with a quote from a recent publication entitled Income Distribution in New Zealand written by George Barker.

He says in summarising his research...

From the perspective of a dynamic and theoretical analysis of the determinants of personal income growth, observed trends towards increasing returns to skill and work experience may have beneficial long-run effects both on economic growth, and on the ability of individuals to improve their earnings over time.

The better performing labour market and employment growth observed since 1991 is also likely to continue to benefit everyone.

That is a pretty tentative bunch of words, but he seems to be saying that since 1991, things have got better since the labour market began to work better.

Assume he is right, based on the observed facts.

If we can make the labour market perform even better than it has in the last 6 years, then we can look forward to more jobs and higher real incomes for everyone.

That is the real challenge I see for you in your businesses, and for the Coalition Government.