Labour Reform in New Zealand: Is There a Future for Unions?

June 1 st 1995

As late as the mid-1980s, New Zealand possessed an industrial relations system that had remained fundamentally unchanged since 1894 when the Industrial Relations and Conciliation Act was introduced. This legislation was part of the social "experimentation" of the Liberal government under the guidance of William Pember Reeves. The scheme introduced by the Act reflected a collectivist-liberal reaction to the damaging effects on the lives of New Zealand working people brought about by nineteenth century laissez-faire capitalism. Welfare liberals such as Reeves saw a central role for the state in providing what individuals and voluntary organizations could not provide for themselves without assistance in the way of protecting and promoting the legitimate interests of working people and their families.

Although British emigrants brought to New Zealand trade union ideals and organization as well as the capitalist form of industrial organization, differences of population, geography, history, and degree of social class division meant that trade unions had not become as strongly established or as well organized as many of their British counterparts. Yet, there was no less need for such organizations to counter the exploitative practices of employers, as the findings of the 1890 Royal Commission into "sweating" attested. The Industrial Relations and Conciliation Act embodied a belief in the positive social value of trade unions and thus ensured them statutory recognition. However, it did more than give them mere recognition. It featured a statutory scheme of compulsory arbitration and conciliation under which employers were required to negotiate with unions which satisfied the minimum requirements of registration. This was a scheme designed to promote unionism and foster social harmony.

Changes in social, political, and economic conditions over the years have brought changes to the statutory system. None of these changes affected the basic principles of a union-based statutory scheme of industrial negotiation. The Labour Relations Act (1987), for example, aimed to strengthen union organization by setting a membership limit (1,000) on eligibility for registration under the Act, thus providing an incentive for small unions to amalgamate or join larger, stronger unions.

Anti-union legislation

During the period of radical public policy reform in New Zealand, from the mid-eighties to about the mid-nineties, industrial relations was one of the few areas not subject to reform by the Labour government. The National government, however, almost immediately on gaining office in 1990, set in train the process of reform that led to the Employment Contracts Act (1991).

This was an unashamedly antiunion piece of legislation straight out of the deregulating handbook of individualist neoclassical economic and social theory. Whereas the 1987 reforms had, if anything, bolstered the role of unions and collective bargaining, this Act does not even mention the term "union." At its core is the individual employment contract. It brings within the ambit of a statutory scheme for the first time all employment contracts. Collective agreements between employee organizations (unions) and employer organizations are now also treated as enforceable contracts. While there is provision for individuals to be represented by "employee organizations," there is no special legal status accorded to unions. They have now become incorporated societies no different from many other kinds of voluntary organization. A persistent feature of the old union-based scheme, single-union monopoly coupled with compulsory unionism, disappeared.

Often touted as a model of free-market reform by both supporters and detractors, the Act is not quite the example of pure free-market reform that a deregulating Treasury had advocated. The Act made provision for two specialist tribunals, retaining the Employment Court and introducing an Employment Tribunal. It also retained personal grievance procedures for employees who wish to bring claims of unjust dismissal. Recent court decisions interpreting the provisions of the Act relating to "authorization" of bargaining agents have leaned towards strengthening the rights of employees and their representative organizations vis-a-vis the employer.

Increased vulnerability

One of the major criticisms of the reform was the alleged detrimental consequences for the most vulnerable employees, the young, the unskilled, uneducated, poor, and women, many of whom comprise Maori and Polynesian people and are nonunionized. Their increased vulnerability, it was argued, would result from exposure to potential employer exploitation through individual contracts. Partly in response to these criticisms, minimum wage legislation has been introduced, a form of state regulation that is directly counter to the purist's version of the deregulated market. The 1987 Act saw a significant decrease in the number of unions, but the 1991 legislation has seen a significant decrease in union membership across the workforce. Many of the anticipated inequities have in fact occurred. For example, studies have shown that the position of women has worsened since the Act's implementation.

Lowering of wages through a less-regulated labour market was seen by the reformers as a strategy for enhanced productivity and efficiency. There is, however, a strong body of academic opinion based on solid research that such a strategy may well have the opposite effect as small-sized firms in particular decrease their investment in employee up-skilling and retraining. Furthermore, the benefits of decentralizing of the wage-bargaining process and increased enterprise bargaining had already been taking place under the regime introduced by the 1987 legislation. Deunionization and individualization of employment agreements was not a necessary condition for "flexibilization" of the labour market and other desirable changes the 1991 Act was supposed to effect.

The object of removing unions from the centre of employment bargaining appears unlikely to be achieved. Unions continue to play a key role as both employees and employers recognize the benefits of organizations established to represent the interests of employees. Nevertheless, the Act does little to encourage unions. It provides incentives for anti-union behaviour on the part of employers and fosters the re-emergence of industrial relations conflict. And although unions will continue to occupy a central role in industrial relations, the fact remains that many of the most vulnerable employees are left exposed through lack of adequate representation and protection in the process of fixing employment conditions.

Unintended opportunity

This piece of reform shares features in common with other reforms which have taken place in New Zealand in recent times (see my earlier article in the Spring 1995 issue of WRF Comment). It is premised on an individualistic view of society which sees the society and its institutions as composed of nothing more than interacting individuals. It is also a materialistic or "economistic" view because its idea of a desirable society is one in which the value of (economic) wealth maximization is given a prime position. Property rights traded in the market are the mechanism for realizing this value. The less interference with the functioning of this market the better. This, of course, includes the market in labour. Labour is treated as a mere economic commodity divorced from the flesh and blood people who provide it. The function of law is seen as primarily to promote this unfettered operation of the market and for this reason it favours private law regulation and its concept of "equity" while disregarding a broader notion of legal justice encompassing "social justice" responsibility on the part of the state. But even the common law recognizes that, within the typical two-party contractual nexus, power imbalances can exist and that the inferior party at times deserves protection. It is disquieting, therefore, that the Act limits the full scope of common law-based doctrines affecting unfair bargains.

The irony of the anti-union Employment Contracts Act is that, by removing the long-held monopoly of registered unions under the former scheme in an attempt to undermine unionism itself, it opens the way for a plurality of organizations and possibly a much healthier union environment. In particular, it creates the possibility for an organization such as the Christian Labour Association of Canada, which stands for principles antithetical to the ideology that gave rise to the Act. I have in mind its commitment to the normative idea of the economic enterprise as a cooperative human community in which all its members, from managing director to shop-floor worker, have a right to participate and contribute to decisions affecting its goals and direction. This is a union that encourages enterprise profit-making not as the goal but as a necessary condition for economic viability and never at the expense of the employee's or consumer's welfare. Not profit maximization, but the stewardly production of goods and services to meet the needs of society and to enhance the quality of life is the goal of business.

The reality of business and industrial life is only rarely like this. So is there really any point in an association such as CLAC? Part of the answer to this question would be found in the responses of employees who have received the benefits of such an

organization. And the power of CLAC's witness to sound principles of work economic organization within its own context and for more distant places, such as New Zealand, cannot be underestimated. But the impetus to form an organization like CLAC and the power of its witness do not rest on human effort alone. Without the reality of a loving God and an empowering Spirit, it would not have come into being. Only hearts open to the spiritual power-base of that labour organization's daily witness will produce a similar organization in New Zealand and enable employees to take advantage of the unintended opportunity presented by this country's labour relations reform.


Alan Cameron (M.N.Z.F.G. LLB (Hons), LLM) retired from Victoria University of Wellington in 2008. Today, he engages in reformational scholarship in legal theory, with a view to producing a conceptual introduction to the discipline of law.