Employment Contracts Act deregulates the labour market

The crucial difference between the Employment Relations Bill and the Employment Contracts Act is a difference of philosophy. The Bill acknowledges the inherent inequality of bargaining power between workers and employers and recognises that labour is not a commodity. It is designed to encourage mutual trust in employment relationships by promoting good faith behaviour, collective bargaining and mediation.


However the Bill has much more in common with the ECA than the arbitration system when it comes to wage negotiation mechanisms. Like the ECA, its wage-fixing procedures are based on individual choice. Unlike the arbitration system, unions will have no blanket coverage or compulsory membership to allow them to cover particular groups of workers as of right. The Bill allows the right to strike for multi-employer agreements, but does not prescribe outcomes. It contains no mechanisms to recreate a centralised, relativity driven wage-fixing system based on national awards. Nor does the present pattern of collective bargaining provide grounds for a return to the old system. Data on collective bargaining shows that most workers are covered by single employer contracts.

‘It was a considerable advantage to the PSA that it already had in place both the mechanisms for enterprise bargaining and a system of voluntary unionism, which were two of the key thrusts of the Employment Contracts Bill …’ This comment by Joris de Bres, the PSA’s assistant general secretary (industrial), points to the different impact of the Employment Contracts Act (ECA) on public sector and private sector unions.

Despite strong union opposition, the ECA became law on 15 May 1991. It was the most radical change to New Zealand’s industrial relations legislation for nearly a century. It threw out national wage bargaining, which had allowed unions to negotiate agreements binding thousands of workers and employers in particular occupations and industries. The ECA provided for individual or collective employment contracts but gave a strong nod to the former. It introduced voluntary unionism and said employers only had to ‘recognise’ workers’ bargaining agents. There was no requirement for employers to negotiate with unions. To discourage industry agreements, the right to strike was limited to negotiations for enterprise collectives. In contrast to its anti-union provisions, the ECA extended the right to take personal grievances to all workers.

The ECA resulted In a big drop in union membership and collective bargaining. However it never won public support and unions never gave up the fight against it. In 2000, the ECA was scrapped.

Source: Joris de Bres, Reflections on Unionism, New Zealand Public Service Association, 1998

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