Wednesday 2 August
0715 Speech Notes

BNZ Breakfast for clients
"The impact of the ERB"
Venue: Ballroom, L6, Duxton Hotel

Wednesday 2 August 0715

Prophecies and profits

Eight weeks from now, New Zealand workplaces will be governed by a new law.

The law is far-reaching and builds on the best of past practice while introducing new procedures and approaches. It is unlike anything we have known before.

Ultimately our workplaces are the source of all the nation's wealth. Investors have been concerned about the change.

The government has listened very closely to what has been said by business.

Both coalition partners have agreed with changes to the Bill which were sought by business and others.

Businesses I have visited are prepared to make the new law work for them and their employees. The major risk at the moment is not that the law will not work – it is that some people will not allow it to work because their prophecies have become self-fulfilling, just as prophecies about the present law became self-fulfilling when it was introduced a decade ago.

The Employment Contracts Act did nothing to support unions.

After the law was passed a great many unionists made statements about how awful the law would be.

They projected an image that as unions they were somehow bound to fail, that the employers were omnipotent, and that little could be achieved.

Their prophecies, to some extent, became self-fulfilling. In some cases, the unionists simply gave up.

The success of those unions still with us shows that giving up was not the only option.

There is now a danger of business doing the same thing in response to the exaggerations and absurdities about the Employment Relations Bill put forward by its opponents.

Don't believe everything you hear

My message is clear: the Bill will be good for business. It will make life easier, not harder.

But my clear message sometimes has to be shouted against a whirlwind of misinformation.

One business weekly, which I hope does not reflect the views of major clients of the BNZ, said last week that:

"the victims of this bill litter the economic landscape. The markets for quality houses, yachts, marinas, luxury cars, the trappings of the business executive are in tatters as businesses shut down or shift to Australia."

I have to say that the victims I see in the economic landscape are of a different sort. And I have to advise those thinking of abandoning their Lexuses and heading to Australia: you'll find the Australian employment laws a great deal tougher than the Employment Relations Bill.

But this is the sort of extreme statement which an experienced editor thinks finds a ready market among New Zealand businesses.

A few days ago I had to issue a statement refuting an absurdity by one of the employers representatives campaigning against the Bill. The statement said:

"Being able to call strikes to achieve the equivalent of national awards will soon be legal, unlike now. This will put some employers at the mercy of national unions."

This was, of course, quite wrong. There will be no national awards.

But even after months of discussions it is still possible to circulate such untruths about the Bill and have them believed.

On Monday, a small party thought it should talk to audiences of business people about the content of the Bill before it was reported back to the house.

I was able to identify more than 20 statements in its written material which would have misled businesses about the nature of the law. Some of the statements were simply wrong.

The Bill, when people actually read it, is seen as sensible and moderate

I want to give a very clear message to businesses. Look closely at the Bill yourself. Read what we have said about it on the government website. Once the law is passed, take notice of the objective explanatory material distributed by the Department of Labour. Invite me or department staff to meetings to discuss it with you. You will find a lot of commonsense in the Bill.

You will find a moderate piece of legislation which does not return us to the days of national awards, compulsory unionism or compulsory arbitration.

Do not allow the prophecies of doom-sayers to become self-fulfilling.

Don't believe those who say that New Zealand workplaces will become strike-bound.

Don't believe those who say the value will go out of businesses because no-one will want to invest. The Bill will not produce such extreme results. Rather, it will be good for business.

The ERB represents a growing consensus.

National awards, compulsory unionism and compulsory arbitration
were once policies enthusiastically endorsed by the Labour Party.

They are not in this Bill. That shows the way in which a consensus is developing. The parties of the centre and the left have accepted that employers and employees themselves must decide the best wages and conditions in their workplaces or industries. The centre-left has accepted that state imposition of union membership is no longer acceptable.

In the future the Employment Relations Act will be seen as a moderate, middle position between the extremes of the former New Zealand industrial relations system and the Employment Contracts Act.

The ERB's purpose

One thing we've hardly ever heard is what the Bill says about itself. Listen to what it says in the introduction. It makes what the Bill is about very clear: the Bill

"is based on the understanding that employment is a human relationship involving issues of mutual trust, confidence and fair dealing, and is not simply a contractual, economic exchange. This basis requires specific recognition in any regulation of the relationship – something not satisfactorily achieved by general contract law.

"The overarching objective of the Employment Relations Bill is therefore to build productive employment relationships through the promotion of mutual trust and confidence in all aspects of the employment environment.

"In order to achieve this primary purpose, the Bill specifically

 recognises that employment relationships must be built on good faith behaviour; and
 acknowledges and addresses the inherent inequality of bargaining power in employment relationships; and
 promotes collective bargaining; and
 protects the integrity of individual choice; and
 promotes mediation as the primary problem-resolving mechanism; and
 reduces the need for judicial intervention."

This government believes that there is a place for unions. Unions are an essential part of democratic life. They empower workers and allow their views to be expressed. They balance the power and influence of employers and allow the dignity of all work to be recognised.

How the Bill will help business

And there are specific improvements to the present law in the Bill which will help employers

 The new Mediation Service, which will provide rapid, professional support to resolve grievances by agreement before they snowball into costly litigation

 The requirement for unions and management to negotiate in good faith: this promotes responsible unionism and protects employers from unfair negotiating tactics, as well as requiring all employers to respond in good faith. I know, as a veteran practitioner of Industrial law that bad faith from employers and unions has been common in New Zealand. In some industries, where adversarial relationships have been the norm, bad faith is a part of the culture. This was a part of the old world, to which we are not returning.

 The even-handed and clear bargaining requirements which will help protect responsible businesses from being undercut by unscrupulous business competitors willing to underpay workers

 Union coverage is contestable – meaning employees can choose the union they want, or they can choose not to belong to a union

 Unions will be required to be democratic & accountable to their members.

The changes

In addition, we have listened to those who sought changes in the Bill. There have been changes and they were reported back yesterday by the Select Committee. You will have heard the main changes. I recommend buying a copy of the Bill, or visiting the executive website. There's a chance to e-mail questions and get a reply – and later this morning I'll be happy to take as many questions here as we can manage.

To repeat my message about changes to the Bill:

 genuine contractors will not become employees. And if another law applies – this law will not override it

 fixed-term contracts for fixed-term work can continue

 responsible communication from employers to their employees during bargaining will be protected; and day to day communication is enhanced by the good faith provisions. The only communications which are prevented are those which would break the underlying good faith provisions of the law

 employers will no longer face confusion about their responsibilities to staff in the event of a business sale or merger

 the liability of directors under the Minimum Wage Act and the Holidays Act is limited to those very rare situations in which they have directed or authorised underpayments and the company is insolvent. Proceedings can be actioned only by a Labour Inspector – not by a union or employee

 confidential information is safe from competitors. In negotiations employers and unions can ask the other party for facts to back up claims. But if it's not relevant it doesn't have to be revealed. And, if the information is of a commercially sensitive nature, it may be revealed only to an independent, confidential third party – not the union

I would like to end by looking at the wider context in which the government is making these changes

The wider context – the world labour market

In my travels around the country one of the most common issues raised is not the impact of the ERB but how we as a country can ensure that we improve our capacity and retain skilled people and ensure that there are opportunities for them to use their skills.

It is all too often that I hear about skilled people leaving the country or of skilled immigrants not being able to find jobs that make the best use of their talents and experience.

You know that our Occupational Health and Safety Laws are being reviewed in an effort to lessen the dreadful toll of death, injury and misery inflicted on people in workplaces in New Zealand every year.

Our ACC reforms are well advanced.

Our new modern apprenticeship pilot scheme has begun. But still more is needed.

The improvement in workplace relationships and safety are one part of the equation. We also need to improve the way we attract and retain immigrants.

Our education policies from pre-school to tertiary need to be specifically linked to the type of workforce we need. Industry training is the key to success for all business and the government must be prepared to play its part. Our Labour policies need to take into account the changes to our population.

We know, for example, and have known for a long time, that as the baby boomers begin to retire there will be a much smaller proportion of working age people to support them. And it all needs to link to support our overall economic development programme.

And for this government, all this needs to be seen in the light of our commitment to closing the gaps between Maori success in the economy and that of the rest of society.

The number of Maori entering the workforce as a proportion of the total population is increasing dramatically. Many of the "gaps" are gaps in employment, wages, prospects and type of industry. The government is committed to closing the gaps and, eventually, eliminating them.

This is the wider context of labour market development in which our decision to introduce new workplace laws exists. The Bill, even in its improved state is not enough. We need government policies in all these areas which do not interfere in business but which offer it appropriate support and create a positive environment in which employers and employees will together create wealth to benefit the whole nation.

The Employment Relations Bill is one positive move by the government towards these goals. It is intended to place our workplaces not in the third world contracting environment of the present law, but in the mainstream of the western world.

ENDS

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