A Proposed Labor Bill Would Restrict Choice, Flexibility, and Fairness for Workers and Employers
In the September 2000 issue of this magazine I reported that the Labour Party in New Zealand, at the behest of labor unions, had repealed the 1991 Employment Contracts Act (ECA), which had abolished compulsory unionism there. In its place was substituted the Employment Relations Act (ERA) to help unions reverse their drastic decline in membership.
It didn’t work. When the ECA was repealed in 2000, only around 20 percent of New Zealand workers were covered by collective-bargaining agreements. In December 2003 the figure was still around 20 percent. The special privileges given to union organizers by the ERA were not strong enough to overcome the culture of voluntarism that emerged during the years of the ECA. Distraught union bosses have now instructed their mandataries in the Labour Party to change the law yet again, and in December Labour Minister Margaret Wilson announced a new bill that, she hopes, will accomplish her masters’ ends.
From a classical-liberal perspective there are four particularly egregious features of the proposed bill: It disadvantages individual, relative to collective, employment contracts; it imposes drastic new “good faith” requirements on both collective and individual bargaining; it promotes multi-employer collective bargaining; and it forces transfer of terms of employment from one employer to successor employers or contractors.
Unlike American workers, New Zealand workers have a right to decide whether to be subject to a collective agreement between a union and an employer or to negotiate an individual contract. In America, where there is a certified union, all workers are forced to be represented by it and are subject to its collective agreements. That is called “exclusive representation.” New Zealand unionists would love to have such monopoly bargaining privileges, but as of yet even the Labour Party has refused to go that far.
Nevertheless, the proposed amendments are a step in that direction. They would make it illegal for an employer (without union permission) to grant workers on individual contracts the same terms of employment that are in the union’s collective agreement. Moreover, an employer would be forbidden to offer any better terms of employment to workers on individual contracts because it would be a “breach of good faith” for an employer to do anything to “undermine” any collective agreement. Minister Wilson cited offering better terms in individual contracts as an example of such a breach. So it looks as if the only alternative open to an employer is to offer inferior terms of employment in individual contracts. I suppose if this doesn’t work, the next thing they will try is exclusive representation.
Under the proposed amendments all labor-management relations must be conducted under a “duty of good faith,” which, in Wilson’s words, “means more than the common law obligations of mutual trust and confidence.” Section 6 of the bill says that the duty of good faith “requires the parties to an employment relationship to be active and constructive in establishing and maintaining a productive employment relationship in which the parties are, among other things, responsive, communicative, and supportive.” Wow! That is sufficiently mushy to sustain just about any allegation of breach by any employer who does not cave in to union demands. Once such an allegation is upheld, the Employment Relations Authority can impose terms on employers. It seems that union negotiators have been unable to achieve terms of employment in collective agreements that would really be attractive to workers; so now such terms will be imposed. Moreover, unions are given the right to see to it that employers adhere to this inflated notion of good faith in their bargaining with individual workers who want nothing to do with unions.
Before the enactment of the ECA in 1991, unionism was compulsory in most employments, and wages were often set by “national awards” agreed to by unions and government bureaucrats. The ECA moved negotiations in the labor market to the individual firm level and gave workers a genuine choice of whether to participate in collective agreements or not. Of course, unions prefer to bargain with several employers at once because that prevents individual employers from gaining cost advantages over their rivals who consent to union demands. Economists call a situation where one union (a cartel of workers) bargains simultaneously with all employers in an industry as a group (a cartel of employers) “bilateral monopoly bargaining.” In such bargaining it is easy for employers to pass along cost increases to consumers.
Multi-Employer Collective Agreements
Toward that end the proposed bill stipulates that any union can approach any group of employers and propose multi-employer collective bargaining. Each employer who is asked must attend at least one meeting with his fellow employers and the initiating union, and bargain in good faith over the proposal. If no agreement is reached, and the Employment Relations Authority decides there is a breach of good faith, such an arrangement may be imposed.
The proposed bill stipulates that all employment contracts, whether collective or individual, must include provisions that “protect” workers when their existing employer sells or transfers ownership of his business or contracts out any jobs. Moreover, existing employers will have a duty to engage in good-faith negotiations with successor employers over terms of employment for affected employees.
The bill even goes further in the case of a specific list of “vulnerable” workers. Here it is not a matter of negotiation at all. Successor employers must hire vulnerables at terms that are at least as good as they enjoyed before. Failing that, they must negotiate a redundancy agreement or have one imposed on them. This will do wonders for flexibility of organizational architecture in response to frequently changing market conditions in the global economy.
Minister Wilson claims the proposed bill will promote “free choice, flexibility and fairness to all [and] support a more innovative economy.” That is risible. The actual effect will be to move New Zealand back toward serfdom. Politicians never learn.
