How New Zealand’s New Sectoral Collective Bargaining Model Would Work in Canada

Written by David Doorey, York University

New Zealand’s government is in the news for more than its stellar management of COVID.  This week, the government announced its intention to move forward with an interesting new model of “sectoral” collective bargaining called Fair Pay Agreements. This move is attracting considerable attention in the global labour law world because sectoral or broader-based based bargaining has been floated for years as the solution to declining collective bargaining coverage in countries, including Canada and the US, that rely upon decentralized, workplace by workplace bargaining in most cases.  The Clean Slate project out of Harvard Law School I participated in a couple of years ago recommended a model of sectoral bargaining for the US similar to the New Zealand model.

Sectoral bargaining moves the bargaining upwards to the sector or industry level and permits collective bargaining to set standards that apply to all workers in that sector or industry.  A central ambition of sectoral bargaining is to take low wages out of competition so that businesses compete on factors other than low wages, long hours, and other terrible labour practices.  Low wage sectors like retail, food and hospitality, homecare, and agriculture are among those areas that advocates argue would most benefit from sectoral bargaining.

However, employers are almost uniformly opposed to broader based bargaining models, as they are in New Zealand, except when they work for their own benefit (see the history of sectoral bargaining in Ontario construction).  Although some Canadian governments have explored extending sectoral bargaining to some low-wage industries (see my summary of the most discussed model here), ultimately, they have backed down due to employer opposition, a lack of a unified voice from labour, and uncertainty about how and whether proposed models would work in practice.

For all of these reasons, the NZ experiment will be watched with great interest.  In this post, I attempt to explain my reading of how the NZ model will work using a Canadian hypothetical.  I have attached a PDF summary of the New Zealand model at the end of this post, if you are interested.  Or you can look at the government’s source documents yourself.  Here is short overview prepared by the NZ government. Here is an earlier Discussion Paper prepared for the government.  I may not have everything right, since I did a quick read. If I have something wrong, please let me know.

Here is my attempt to explain how the model would work if it were in effect in Canada.  Let’s use as an example the fast-food industry in Ontario.

Imagine a union applying to represent all fast-food workers in Ontario in negotiations for a Fair Pay Agreement that fixes minimum pay rates and basic rules on hours of work and overtime.  Here is how the new New Zealand model would work if it were law here.

A Canadian Hypothetical Application of the New Zealand Model

The NZ model permits a union (or unions) to apply to represent a specific occupation (for example, cashiers employed at fast food restaurants, a unit by the way that would be primarily female), or industry (all fast-food employees).

Let’s say that the UFCW applies to represent all Fast-Food workers in Ontario, an industry-wide unit rather than a more narrow “occupation” unit.  Maybe the law would permit unions to go by city or municipality, such as the City of Toronto, but let’s aim big! Or maybe the UFCW and another union, say Unifor, coordinate together to organize fast food workers. [Can Canadian unions cooperate?  Big question.]

In order to start the process towards achieving a Fair Pay Agreement (FPA), the union(s) would need to collect union membership cards on behalf of at least 10% of employees working in fast food in Ontario (I assume some Stats Canada figure could be used to calculate that number) OR a minimum of 1000 employees. It is only “employees” who are covered, not contractors (although the government has said it intends to extent the model to contractors later).  If the union(s) can reach the required threshold, they can apply to bargain an FPA. This is like an application for certification using card-check.  The Labour Board would check the cards and the stats and determine if the union(s) have met the threshold. If so, the FPA bargaining process would begin.

[Note that there is another “public interest method” way to start the process that does not require the unions to meet these thresholds, which I discuss in the attached document, but we will use what I assume will be the more common approach in my example]

At this point, if not before, the fast-food employers would need to organize themselves and decide who is going to represent the industry in bargaining.  The provincial government could help with this and also provide some start-up funding to help employers organize.  But ultimately some form of employer association comprised of every fast-food restaurant you can think of must come to the table to bargain industry level base rules relating to wages, hours of work, and overtime pay.  Maybe other items will be negotiated too, but these items MUST be agreed upon.  The two parties then bargain “in good faith”, a concept that presumably takes on the same meaning as under existing labour law.

If the parties reach a deal, that deal must then be “ratified” by the employees and the employers.  All fast-food workers in Ontario get notice of the vote and I presume some way to vote electronically on the proposed FPA.  I will pause here to note that the law requires employers to provide the unions with the contact information of all the employees covered by the proposed FPA (employees can opt out), and to permit the union access to the workplace to speak to employees during non-working time AND the employer must permit the union to hold at least 2 paid, two-hour meetings at the workplace to discuss the FPA.  You can imagine that this is not very popular with the employers!

If a majority of ballots support the FPA, then the employees have accepted the FPA. However,  the employers must also vote to accept the FPA. For employers, voting is weighted: an employer with 200 employees gets 200 votes, but smaller employers, say with 20 or fewer employees get a weighted tally based on government-imposed rules.  For example, small employers might get 2 votes per employee.  Presumably the point of that exercise is to respond in a small way to concerns that large fast-food conglomerates could use the process to drive smaller lower-margin employers out of business by agreeing to terms more favourable to larger employers.  This was an issue raised by the Changing Workplace Review in Ontario as a reason to reject sectoral bargaining.

If the FPA is ratified by employees and employers, then it’s done and ready to be implemented.  If the FPA is voted down, the parties return to the bargaining table, however if the FPA is voted down twice, then the terms of the FPA are sent to binding arbitration. I imagine a system of Final Offer Arbitration here, in which both parties put forward their best offer and the arbitrator chooses one. Note that there is no strike option here. An industry wide strike in support of a FPA would be unlawful in Canada.

Once the FPA is finalized, either because it was ratified or because an arbitrator imposed it, the FPA is then becomes law. This is not a model we use much in Canada, but the idea of a negotiated agreement being introduced as law is an interesting regulatory technique with lots of examples.  The Ontario government would enact a statute (the Fair Pay Agreements Act, say) that would include the infrastructure of the model and a section that permits Regulations that would incorporate FPA.  Once that Regulation is enacted, the FPA is effectively law and can be enforced as a Regulation. Complaints alleging bad faith bargaining or violation of the FPA would go to the Labour Board, like an employment standards or unfair labour practice complaint.  Or maybe the government creates a new tribunal to deal expressly with the new FPA model.

The FPA would apply to all fast-food workers in Ontario. Not all of them would be union members, but the law requires the UFCW (and maybe Unifor) to represent all employees covered by FPA fairly in relation to the negotiations, although the unions are permitted to bargain into the FPA a wage premium equal to the amount of union dues.  I assume that the unions would not be legally required to represent non-members in complaints that the FPA has been violated, but those employees can file their own complaint with the Tribunal.  Perhaps a benefit of joining the union would be these extra representational rights.  Also, I assume that the unions could still organize individual stores under the traditional collective bargaining legislation, since the FPA merely creates basic minimum standards.  An employer can also always offer employees more than the FPA.

That’s basically how the model works.

What do we think?  Would this work in Canada?  Would it be an improvement over existing labour standards legislation, which also creates a statutory floor of rights. Why or why not?

Here is my summary of the New Zealand Fair Pay Agreement model.

David Doorey, “How New Zealand’s New Sectoral Collective Bargaining Model Would Work in Canada” Canadian Law of Work Forum (May 11 2021): https://lawofwork.ca/nzsectoralbargaining/