Holidays Amendment Bill 2003 submission

SUBMISSIONS

of the

NEW ZEALAND RETAILERS ASSOCIATION

in relation to

THE EMPLOYMENT RELATIONS LAW REFORM BILL 2003

to the

TRANSPORT AND INDUSTRIAL RELATIONS SELECT COMMITTEE

26 February 2004

INDUSTRY PROFILE AND DESCRIPTION OF THE ASSOCIATION

These submissions are presented by the New Zealand Retailers Association Inc

The Association is the largest sectoral group representing the retail industry in New Zealand. Our membership embraces the major supermarket and general merchandise chains, specialised retail chains, traditional department stores and hundreds of owner operators spread throughout the country.

Our membership also includes a number of specialist wholesale and retail trade groups including plumbing materials suppliers, metal fastener distributors, bicycle dealers, pet shops, jewellers and equestrian suppliers.

The retail industry is a substantial contributor to the New Zealand economy and a very large employer.

Statistics NZ's Annual Enterprise Survey notes that there are over 325,000 people (estimated to be 17% of the total workforce) employed in some 49,000 retail outlets throughout the country.

Annual retail sales in total now exceed NZ$50 billion.

BACKGROUND

The Association notes that this is the second major industrial initiative on employment relations which has been developed since this Government first came to power in 2000.

Some four years ago we made extensive submissions on the Employment Relations Bill 2000 outlining our concern that:

• the legislation would bring about additional compliance costs to the retail sector in New Zealand, particularly to small businesses;
• that the legislation would result in reduced employment opportunities within the retail sector in New Zealand, and
• that the proposed changes  would be more appropriately considered as part of a wider ' industrial package' that embraced other legislation such as the Holidays Act, Wages Protection and Minimum Wage Act and the Parental Leave and Employment Protection Act 1987.

We also made detailed submissions on a number of technical clauses or parts of the Bill that we identified as having negative impacts on good industrial relations within the retail sector in New Zealand.

Despite the evidence of overall economic growth, there is strong anecdotal evidence to confirm that the changes enacted in the 2000 Act have added significantly to the operating costs of retail employers and that there is concern at the viability of employing additional staff.

Since 2000, we have been actively involved with working parties established by the Government to examine various aspects of industrial legislation within New Zealand, including changes to holidays legislation, shops trading hours, health and safety and the contentious issue of contracting-out/ sale of business operations that has now surfaced again in this Bill.

The Association's contribution to the debate on these issues has been well recognised. On each occasion we have stressed the need for a realistic framework of legislation and regulation to facilitate growth and effective management and particularly to recognise the interests of the very large number of small to medium sized businesses that make up a major part of the retail industry.

However, despite the apparent acceptance of the importance of this sector to the economy, we note that successive changes in legislation and particularly those affecting employment have increased compliance costs and made the process of employing and managing staff more complex and expensive.

For that reason we strongly urge the Committee to seriously consider the issues we have raised in this submission and to make the changes proposed.

If the changes proceed as proposed in the Bill, we see serious implications for the retail industry. Considering the major contribution retail makes to the New Zealand economy, the negative effects of the changes proposed will impact on all New Zealanders.

SUMMARY OF SUBMISSIONS AND GENERAL COMMENT ON THE BILL

The Association worked closely with Business New Zealand in the development of its policy position on this legislation and supports in principle their comprehensive submission. We will not make detailed submissions on all of those matters.

We also strongly endorse the submissions of Progressive Enterprises Ltd and Paper Plus New Zealand Ltd both of whom will seek to be heard by the committee. We urge the Committee to take note of the views they express and their strong concerns at the impact the proposals will have on their businesses.

Progressive Enterprises is one of New Zealand's largest employers and the Paper Plus group represents many smaller employers throughout New Zealand.  Together these organisations represent a wide cross-section of New Zealand society. Their views are an important indicator of the serious concern that businesses large and small feel about the Bill and the changes proposed.

The main focus of this submission is the issues that we consider will particularly affect retailers and the orderly operation of retail in New Zealand. In particular, we see six major issues that will have a detrimental effect on the retail sector and these will be the focus of our submission:

• the proposed extension of the 'good faith' concept;
• promotion of collective bargaining;
• fixed term agreements;
• unlimited union access;
• personal grievances and standards for dismissal and discipline of staff
• sale and transfer of businesses

Looking at the Bill overall and considering the interests of the retail industry and the very large number of employers involved, large and small, we can identify no issues that justify the radical and extensive change proposed by the Bill.  The settled state of employment relations in this industry and low level of disputes and grievances confirms our view that the present legislation is achieving its object to 'build productive employment relationships'. 

The legislation is only three years old. When passed in 2000, it introduced major policy shifts that were difficult to communicate to many of our members. Further change at this time will only cause confusion and disrupt established processes.

Many of our members and many other employers in the retail industry are relatively small businesses run by working proprietors. They do not have the resources or skills to understand and implement the changes required by this law. It is hard to see what real difference it will make to the interests of their employees. In several areas the proposals introduce new language and concepts that are simply meaningless for most employers in this industry. 

It is apparent that the policy objectives in the Bill reflect a view that employers have no interest in ensuring the welfare of their staff and that employees are not capable of engaging with employers in a meaningful way without union intervention. Nothing is further from the truth. 

In the retail industry customer service is the key to success and good relationships between all involved in the enterprise are essential to run a profitable and successful business. The low level of union involvement in the industry demonstrates that employees do not share the view that they require union support. 

If the Bill is enacted later this year as planned it will require extensive change in workplace practices.  This comes on top of the major changes required by 1 April 2004 to comply with the Holidays Act. We believe from comments received from members that there is a serious risk that many employers, especially the small and medium sized retailers that comprise a large part of this industry, will be overwhelmed by the changes required and fail to take the actions required.

If the law does not have widespread support, it can only fail in its objectives.  We strongly submit that the Bill should not proceed and that further discussion and consultation is initiated with all the affected parties to assess the need for any change at this time.

SPECIFIC SUBMISSIONS

The particular points that we wish to address in relation to the six issues are set out below:

Clause 6(1A), (b), (c) - Parties to deal with each other in good faith

These subsections widen the scope of good faith and will cause unnecessary confusion. There is sufficient guidance currently as to what the obligations of mutual trust and confidence mean, and to change the law as proposed would create much litigation before it is again well understood.

The proposed change to require employers who are proposing to make a decision that will, or is likely to, have an adverse effect on their employment to provide employees with access to information and the opportunity to comment is of concern. Many of our members are small to medium businesses that make commercial decisions that relate to their viability almost on a daily basis. The result will be much confusion as to what should be communicated and will inevitably lead to litigation.

We also point out that the generic code of good faith has worked well and has given both unions and employers certainty in their relationships. That has been an appropriate basis for regulating good faith and setting a standard for parties in bargaining.

Recommendation

Delete this provision from the Bill.

Clause 10 & 12 - Requirement to conclude a CEA

Collective bargaining is not widespread in the retail industry and outside of a small number of the largest corporate retailers, union membership remains low.

This proposal requires the parties to conclude an agreement unless they have genuine reason for not doing so. However the term "genuine reason" is ambiguous and will require litigation before it is clear.

It is a likely scenario that should an employer have a genuine reason for not concluding a CEA the union is likely to not accept that reason. The employer will be required in this scenario to complete negotiations on all non contentious matters. It is highly likely that the matter will be referred to the Authority by the union together with a claim that the employer is acting in bad faith as the union does not accept its reasons for not concluding the agreement. In such a scenario the Authority will be required to 'step into the shoes' of the employer to determine if that reason is genuine.

Not only does this raise concerns as to how long a negotiation process must go on for before halt is finally called, but it also raises issues as to the Authorities competence to determine if the employers reasons are genuine or not.

Recommendation

Delete this proposal from the Bill.

Clause 11 - Requirement to continue bargaining

It is not realistic for the parties to continue to negotiate if they have reached a stalemate. This clause would merely result in both parties devoting resources and time to pointless negotiations.

Section 32(2) of the current Act has proved to be sensible and workable and makes it clear that the parties must consider and respond to proposals but they are not required to enter into pointless discussions.

Recommendation

Delete this proposal from the Bill.

Clause 14 - Multi Employer Collective Agreements (MECA's)

This clause together with other changes will require the parties to negotiate and conclude a MECA. Our members operate in a highly competitive environment, if they were required to bargain together with other employers in direct competition they would be required to provide confidential information about their business to the union (with all delegates from the various employers gaining access to it). Would an employer be able to raise this as a genuine reason for not concluding the negotiation?

MECAs also invariably lead to claims for similar terms and conditions of employment, including salaries. Is it a genuine reason to oppose this on the basis that different regions, eg, Auckland versus Dunedin, have different costs of living? Where would this leave the Dunedin employer in a claim for pay equity with Auckland workers?

These are significant issues and as you can see will create much uncertainty and concern.

Recommendation

Delete this proposal from the Bill.

Clause 16 - Ratification of CEA

We see no need for this change. Ratification procedures that require unions to ensure members vote to confirm their support for a settlement ensures union accountability.

This proposal could be open to abuse. Unions could abuse this right by obtaining authority before bargaining commences and then pursuing issues that are union priorities rather than the best interests of their members.

While this proposal will make life easier for unions, it creates a situation where good communication is ignored. Democracy is sidelined for the sake of administrative convenience.

Recommendation

Delete this proposal from the Bill.

Clause 19 - Free riding

This proposal is unnecessary - the principles of good faith that underpin the ERA adequately cover the situation where employers attempt to undermine the bargaining process.

Employers may well wish to offer individual employees who are not union members the same increases and terms and conditions available to union members. The reason for this is to ensure equity and fairness in the workplace and to avoid disharmony.

Most employers have some mechanism for adjusting terms and conditions for those of its staff on IEAs, usually it involves a remuneration policy that is linked to market review. In businesses that have CEAs, many employers use salary movements in negotiations to lead changes for those on IEAs. This is a legitimate and fair practice that this proposal would stop.

It is currently an individuals choice as to whether they belong to a union or not. This provision would have the result of forcing employees to belong to a union, it is in effect a legislative recruitment tool. Our members do not receive legislative support to force customers to use their services - neither should unions.

It would also be administratively onerous to require employers to undertake individual negotiations with all staff who are not union members. The cost is prohibitive and the implications for workplace harmony are serious. 

It is entirely fair and appropriate that employers have the right to determine that conditions in CEA's may be passed on to other employees without restriction.  

Recommendation

Delete proposed changes in the Bill.

Clause 19 - Passing on to other CEAs

Many employers have a deliberate strategy of having consistent terms and conditions for its staff who do the same or similar job. This ensures equity and fairness in the treatment of staff.

The only way to prove intention to undermine is via litigation. Surely the better goal would be to require unions to work together better and negotiate CEAs together? Employers shouldn't be penalised for the failure of unions to work together.

Recommendation

Delete proposal

Clause 27 - Fixed term employment

This is a significant issue for our members. Retailers genuinely need temporary staff to run the business in peak periods and casual employment in the industry is widely sought after. Many New Zealanders have their first exposure to employment working part-time or casually in a retail business while they continue their studies.

Many retail businesses are small enterprises managed by owners who juggle the demands of ownership, management and hands-on work to ensure the business operates effectively. The absolute requirements of the proposed clause are unnecessary and punitive.

Failure to include in writing the reason for the fixed term would result in genuine injustice. Our members often survive on the tightest of margins and simple failure to record the reason for the fixed term when that is clearly understood and accepted is going to create a significant cost and future risk on business that is unfair and unjust.

Recommendation

Delete this proposal from the Bill.

Clause 9 - Union access

This proposal will create two types of union interaction with its members, union meetings covered by section 26 of the ERA which have a time limit and reasonableness requirement and this proposal covering workplace discussions which has no time limit or requirement of reasonableness. 

Employers need protection from unreasonable interference with the running of its business. Employers are generally not unreasonable when asked by unions if they can hold meetings, however there needs to be some protection for employers from union abuse.

Such access rights may lead union reps and employees to believe they have the right to have unlimited discussions during paid work time, including discussions for purposes detrimental to the employer. The employer is entitled to determine if a wage deduction should apply in such circumstances.

Recommendation

Delete proposal.

Clause 37 - Test of justification

There is no justification for departing from the present test for dismissal or disciplinary action. The current test is proven, well understood and consistent with overseas jurisdictions. To change it will only lead to greater litigation and uncertainty.

It is of great concern that a third party view can replace that of a fair and reasonable employer. There is the potential for an employer to reach a different decision on the same set of facts. This could lead to disparity of treatment arguments, eg, a different decision is reached based on the family and financial circumstances of one staff member.

Recommendation

Delete this proposal from the Bill.

Clause 30 - Business transfer

This clause is a major concern to the Association. If enacted as proposed it will have a serious impact on the value of all businesses in New Zealand, particularly those small and medium sized enterprises that are typical of a large part of the retail sector.

The requirement to provide a mechanism in all employment agreements to manage the transfer of staff on the sale of a business will effectively destroy the accrued value in many retail businesses. It will become a substantial barrier to development and places owners in the position where the only viable way to exit a business will be to progressively run it down to avoid punitive exit costs. This will seriously affect the economy in several areas, including employment opportunities. 

We strongly opposed the original proposals in Clause 66 of the 2000 Bill and made extensive submissions to the Ministerial Working Party that addressed this issue after the Act was introduced. We supported the conclusions reached that recognised the particular issues arising from practices in public sector contracting, and the finding that there was no widespread concern in other sectors of the economy that justified legislation of general application.

We are particularly concerned that the two-tier approach taken in this Bill takes the measures into areas where change is not required. This opens the door to further changes at a later stage that will further impact the viability of businesses in the retail industry.

The requirement for this obligation to be dealt with in writing in all employment agreements is onerous and unrealistic. It has no regard for the resources available to businesses that do not have dedicated professional staff dealing with staffing issues. Owner-operators and managers of smaller businesses seldom have the required understanding of legal niceties to effectively discharge obligations that are as subtle and complex as envisaged by this clause.

We believe that inadvertent non-compliance with this obligation would place a significant liability on employers who are not able to effectively understand or comply with it.

The submission of the Paper Plus group gives particular examples of how a restrictive provision like that proposed will affect the value of businesses. We commend their evidence to the committee.

As a matter of principle, we simply do not believe it is reasonable to impose a requirement for a new business to take on liabilities for past services and conditions for employees of the outgoing owner. We believe the provision should be deleted.

However, if the Committee is a determined to retain legislative protection for employees in this area, the requirement should be limited to larger businesses that can more effectively cope with the technical requirements to be imposed. A threshold of a minimum of 250-300 employees would effectively achieve this.

Recommendation

Delete this proposal from the Bill.

COMPLIANCE COSTS

We believe that the Employment Relations Act 2000 added significant additional compliance costs on to employers in the retail sector and noted in our submission at that time that there were 12 particular clauses that imposed new costs. This has been borne out by experience since the Act came into force.

We are disappointed to see that the business compliance cost analysis included in the Bill is brief and generalised to a point where it is meaningless. If enacted as proposed, the Bill will impose extensive costs on business and we strongly urge the Select Committee to conduct further inquiries to properly assess the extent of these costs before proceeding. 

In particular, we see the added complexity introduced by these measures as a barrier to employment. Employers will inevitably seek to limit their liability and risk by holding back on staff replacement and limiting future expansion and development. This will have a real and lasting impact on the economy.

SUMMARY

Overall, we see little merit in the Bill and can identify no good reason for it to proceed.

If enacted as proposed, the Bill will impose new costs and add complexity and hassle to workplaces far in excess of any possible value to employees. We do not share the negative view of workplace relationships that appear to be the policy drivers for this change and suggest that a much more extensive and open process is required to assess the views of parties involved.

We strongly urge that the Bill be deferred to allow Government to initiate a full consultation process with all interested parties to assess the need for further change at this time.

REQUEST TO BE HEARD

The Association wishes to appear before the Select Committee in support of this submission.

John Albertson

Chief Executive