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Employment Court approves a "game breaker" and fixes contract terms

March 21, 2019

Contacts

Partners Shan Wilson, Phillipa Muir, John Rooney, Samantha Turner
Senior Associates Carl Blake, Bronwyn Heenan, Matthew Piper, Rebecca Rendle

Employment (inc Employment Relations Amendment Bill)

The Employment Court has handed down an important decision (Jacks Hardware and Timber Limited v First Union Incorporated [2019] NZEmpC 20) approving the application of a "game breaker" in collective bargaining and fixing the terms of a collective agreement where the parties were unable to reach agreement.

Facts

The case arises from a lengthy and difficult bargaining process between First Union and Jacks Hardware, which operates Mitre 10 stores in Dunedin and Mosgiel. The parties had been engaged in bargaining for more than five years, but no collective agreement has been concluded. First Union applied to the Employment Relations Authority to fix the remaining provisions of the collective agreement that had not been agreed, in reliance on section 50J of the Employment Relations Act 2000. The two outstanding provisions related to wages and the term of the collective agreement.

Jacks Hardware opposed the application on the basis that the grounds for fixing were not satisfied.

The Authority had granted the application for fixing terms, after concluding that the parties had unsuccessfully used direct bargaining, mediation, facilitation and litigation to try to reach agreement and that all reasonable alternatives had been exhausted.

Decision

In the Court, Jacks Hardware argued that the grounds for a fixing application had not been established. The employer argued:

  1. a breach of good faith previously found to exist by the Court in 2015 was no longer sufficiently serious and sustained such as to significantly undermine the bargaining,

  2. there were other reasonable alternatives for reaching agreement that had not been exhausted, and

  3. fixing was not the only effective remedy.

The Court considered that the grounds for a fixing application were met, and that it was appropriate to fix the provisions in all the circumstances. The Court described section 50J as the "final step in a detailed and lengthy process" where there is a breach of good faith in collective bargaining.

The Court did not accept that the test in section 50J required a new breach of good faith subsequent to that established by the Court in 2015. It went on to find also, that had it needed to decide the point, it would have concluded that Jacks Hardware had breached the duty of good faith subsequently by engaging in delaying behaviour that frustrated the bargaining.

The Court did not accept that there needed to be a high threshold to be reached before the Authority could decide to fix provisions, with the words "sufficiently serious" requiring the Authority to be satisfied that the breach of good faith was adequate or important enough that bargaining was noticeably undermined.

The Court did not accept Jacks Hardware's argument that all other reasonable alternatives for reaching agreement on the terms of the collective had not been exhausted because neither party had stated its final bargaining position. The Court held that the union had made its position clear in inviting Jacks Hardware to state its proposal regarding wage rates.

Ultimately, the Court was satisfied that all of the statutory processes provided by the Employment Relations Act 2000 to assist First Union and Jacks Hardware in negotiating and settling a collective agreement had been used unsuccessfully, and therefore there were no other effective remedies available to First Union but to apply for the provision to be fixed.

The Employment Relations Authority will now hold an Investigation Meeting to fix the wage rates and term of the collective agreement.

Comment

While a successful application to fix provisions of a collective agreement is likely to be very rare in practice given that the step is a last resort, this is nevertheless an important decision. It is the first time that the Court has approved use of this statutory power to override the parties' contractual freedom to define their own bargain in collective negotiations. It is an important reminder to parties to collective bargaining that such a power is available, but also that focussing on reaching agreement is likely to lead to a better outcome overall than risking having a conclusion imposed.

Contributors matt.harrop@simpsongrierson.com