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Bargaining in good faith in the New Zealand labour market: rhetoric or reality? Davenport, Geoff 1998

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Bargaining In Good Faith In The New Zealand Labour Market Rhetoric or Reality? by Geoff Davenport LL.B.(Hons), B.Com, The University of Otago, 1993. A THESIS SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF LAWS in THE FACULTY OF GRADUATE STUDIES THE FACULTY OF LAW We accept this thesis as conforming to the required standard THE UNIVERSITY OF BRITISH COLUMBIA December 1998 © Geoff Colin Davenport, 1998. In presenting this thesis in partial fulfilment of the requirements for an advanced degree at the University of British Columbia, I agree that the Library shall make it freely available for reference and study. I further agree that permission for extensive copying of this thesis for scholarly purposes may be granted by the head of my department or by his or her representatives. It is understood that copying or publication of this thesis for financial gain shall not be allowed without my written permission. Department of A7£ <£rt*&/e3, The University of British Columbia Vancouver, Canada Date DE-6 (2/88) A B S T R A C T N e w Zealand presently operates a "free market" system o f employment and labour relations in w h i c h there are no prescribed or mandatory bargaining procedures. W h e n this system was introduced by the E m p l o y m e n t Contracts A c t 1991 (the " E C A " ) it represented a dramatic departure f r o m the previous system o f state regulated collective bargaining, conci l iat ion and arbitration: a system that had existed in N e w Zealand for almost a century. A l t h o u g h this change i n approach was supported by free market advocates, it also generated considerable international and domestic crit icism. In response to that cr i t ic ism, a number o f N e w Zealand politicians stated in 1996 that they w o u l d consider imposing o n employers and employees a statutory duty to bargain i n g o o d faith. H o w e v e r , since the end o f 1996, very little has occurred in respect o f this issue. Indeed, it n o w appears that the current N e w Zealand Government may have abandoned this proposal altogether. I f this is, i n fact, the Government ' s decision, it ought to be v i e w e d w i t h concern, for it has been made without the benefit o f informed debate. L i t t le , i f any, substantive consideration has been g iven to whether such a duty ought to be introduced, and i f so, the f o r m it might take and impact it might have. I f an informed decision is to be made to enact a duty o f this nature, o r not, as the case may be, its merits must be the subject o f further debate. This thesis w i l l endeavour to contribute to that debate by examining h o w one approach to the duty to bargain i n g o o d faith, that w h i c h applies in B r i t i s h C o l u m b i a , Canada, might operate in N e w Zealand. This examination w i l l consist o f six chapters. T h e first w i l l contextualise the N e w Zealand arguments o n whether a duty o f this nature ought to be introduced into the E C A . Chapter t w o w i l l then examine the duty to bargain in g o o d faith as it applies in B r i t i s h C o l u m b i a industrial relations. Chapter three w i l l take that duty, and examine the extent to w h i c h it is currently replicated in N e w Zealand. It w i l l be concluded that little o f the substance o f this duty is to be found in the l a w w h i c h presently governs the N e w Zealand labour market. Chapter four w i l l assess the costs o f introducing a duty o f this nature into the E C A , particularly in terms o f reduced efficiency and freedom. Chapter five w i l l identify a number o f specific issues that w i l l require resolution i f the duty is to operate effectively i n N e w Zealand, and the terms o f a suggested statutory amendment w i l l be proffered. It w i l l be concluded i n chapter six that introducing a duty to bargain i n g o o d faith, ak in to that w h i c h applies i n B r i t i s h C o l u m b i a , w o u l d benefit N e w Zealand employers, employees and society as a whole . Further, it w i l l be argued that such a duty must be introduced i f labour bargaining i n N e w Zealand is to occur i n any meaningful w a y for most employees. A n d finally, it w i l l be suggested that i f this duty is to be introduced effectively, legislative amendment w i l l be required. F o r these reasons, it w i l l be asserted that the N e w Zealand Government ought to revisit the issue o f introducing into the E C A a statutory duty to bargain in g o o d faith. i i T A B L E O F C O N T E N T S Abstract i i Table of Contents i i i Acknowledgements vi Chapter One The New Zealand Debate Contexualised 1 1.1 L a b o u r Relations in N e w Zealand P r i o r to the E C A 1 1.2 T h e Introduction o f the E C A 4 The Status o f Bargaining Representatives 5 T h e F o r m o f Bargaining and E m p l o y m e n t Contracts. . . . 7 T h e M a n n e r o f Bargaining 9 1.3 V i e w s and Consequences o f the A c t 11 1.4 T h e W i n d s o f Change 27 1.5 The H e r e and N o w 37 Chapter Two British Columbia Labour Relations and the Duty to Bargain in Good Faith 40 2.1 T h e D u t y Def ined 4 0 2.2 The Substance o f the D u t y to B a r g a i n in G o o d Fai th 48 2.3 Statements o f P o l i c y Issued by the B C B o a r d 61 2.4 T h e G o o d Fai th Culture 64 2.5 Summary: G o o d Fai th Bargaining and the B C C o d e 66 Chapter Three Is Legislative Amendment Necessary in New Zealand? 68 3.1 T h e E x i s t i n g Provis ions o f the E C A 68 Section 57: H a r s h and Oppressive C o n d u c t 68 Section 12(2): Bargaining Agents 74 Section 64: L a w f u l Strikes and L o c k o u t s 82 Sections 7, 8 and 28: U n d u e Influence 83 Sections 19(4) and 43(a): A l terat ion to Terms 86 Sect ion 64(2)(c): T h e Protec t ion o f Strikers 91 Sect ion 78: Dispute R e s o l u t i o n 93 Section 104: Misrepresentat ion 94 Sect ion 18: T h e M i n i m u m C o d e 95 iii 3.2 The E m p l o y m e n t C o u r t and the Implied T e r m 97 3.3 Developments in the C o m m o n L a w General ly 108 Cases D e c i d e d on the Basis o f G o o d Fai th 109 T h e Re-Class i f icat ion Debate 112 T h e Influence o f the C i v i l L a w 113 Express Agreements 116 3.4 C o n c l u s i o n : The E x i s t i n g . L a w in N e w Zealand 117 Chapter Four The Good Faith Debate in New Zealand 120 4.1 Eff ic iency and the D u t y to B a r g a i n in G o o d F a i t h 120 Eff ic iency 's Pre-eminent Status 120 T h e Free M a r k e t V i s i o n : Conf l ict Free Employment . . . 121 T h e Cont inuat ion o f Conf l ict U n d e r the E C A 125 T h e Efficiencies o f Free M a r k e t Barga in ing 134 Distr ibutive Eff ic iency 142 Eff ic iency Implications o f the D u t y o f G o o d F a i t h 150 Eff ic iency Gains in the Bargaining Process 152 T h e A v o i d a n c e o f Disputes 154 Col laborat ion and Innovation 156 Distr ibutive Eff ic iency 157 Precedent F o r Imposing the D u t y o f G o o d Fai th 157 4.2 F r e e d o m and the D u t y to B a r g a i n in G o o d F a i t h 159 T h e Importance o f F r e e d o m in the E C A 159 T h e D u t y to B a r g a i n in G o o d Faith and F r e e d o m 160 H o w " F r e e " is the Free M a r k e t ? 163 D o e s F r e e d o m for One M e a n freedom F o r A l l ? 166 4.3 T h e Remaining Debate 174 4.4 C o n c l u s i o n : T h e G o o d F a i t h Debate 179 Chapter Five The Specifics 182 5.1 T h e Individual - Col lect ive D i v i d e 182 5.2 Enforcement and Relevance in the Individual Setting 187 5.3 Selection V e r s u s Bargaining 192 5.4 Arbi t ra t ion as a R e m e d y 194 5.5 Enforcement General ly 197 5.6 A Suggested Amendment 198 Chapter Six Conclusions 204 iv Bibliography 216 Appendix One C la ims o f B a d F a i t h as C o m p a r e d to T o t a l C l a i m s 244 Appendix Two C l a i m Trends: 1978-1997 245 Appendix Three Outcomes o f C la ims o f B a d Faith: 1978-1997 246 Appendix Four First Agreement Appl icat ions: 1993-1997 247 v ACKNOWLEDGEMENTS There are a number o f people I w o u l d l ike to thank for their help and support i n relation to this thesis. First , the support and guidance provided by my supervisor, Professor T o n y H i c k l i n g , has been surpassed only by his enthusiasm. H i s wil l ingness to comment on numerous drafts and papers, and to suggest avenues for further inquiry has been greatly appreciated. Professor H i c k l i n g is a credit not only to the Univers i ty o f B r i t i s h C o l u m b i a , but also to the field o f industrial relations, to w h i c h he devotes considerable time and energy. I am also indebted for the guidance provided by my second reader, Professor Joe Wei ler . H i s wil l ingness to take time out o f a hectic schedule to provide advice o n m y thesis is very gratefully acknowledged. M y thanks must also go to Professor A l a n Geare, D o c t o r Ian M c A n d r e w , Professor M a r k Hennagan and D o c t o r P a u l R o t h (all o f the Univers i ty o f Otago) and to M r T o n y F o r d ( o f B e l l G u l l y B u d d i e W e i r ) all o f w h o m taught me to assess law and industrial relations in a realistic, pragmatic and crit ical fashion. In addit ion, I am very grateful for the support and enthusiasm o f L i l l i a n O n g , D o c t o r W e s l e y Pue , and m y classmates, w h o all must take a great deal o f credit for the extremely rewarding year I have spent at the Univers i ty o f B r i t i s h C o l u m b i a . I must also express my unending gratitude to my parents, C o l i n and M a r i o n , and to m y sister, Sandy, w h o have always encouraged me to tackle m y goals and to be myself. Last ly , and most importantly, to my wife, and best friend, Debs. W e r e it not for y o u r love and support, this thesis w o u l d never have been possible. vi CHAPTER 1: THE NEW ZEALAND DEBATE CONTEXTUALISED 1.1 Labour Relations in New Zealand Prior to the ECA T h e E C A was enacted on 15 M a y 1991. 1 P r i o r to that date the system o f labour relations i n N e w Zealand was based on state facilitated collective bargaining w h i c h occurred between unions (representing collectives o f employees) and employers or their representatives, and w h i c h produced collective awards and agreements. This system commenced w i t h the Industrial Conci l ia t ion and Arbi trat ion A c t 1894 (the " I C A A " ) . The stated purpose o f the I C A A was "to encourage the formation o f industrial unions and associations and to facilitate the settlement o f industrial disputes by conci l iat ion and arbitrat ion." W h i l s t there were several versions o f labour relations legislation i n N e w Zealand f o l l o w i n g the I C A A , each revision retained a central f ramework o f col lective bargaining. 2 That is, o f course, unti l the enactment o f the E C A . A w a r d s were usually occupationally based, 3 and generally covered most or all o f the country. These awards b o u n d all the employees and employers involved in the w o r k to w h i c h they applied, even although the vast majority o f those employers and employees had no input into award negotiations (an affect referred to as "blanket c o v e r a g e " ) 4 A s a result, in most workplaces upwards o f three or four awards were operative at any one time, depending o n the number o f w o r k classifications present. Agreements also tended to be mult i-employer arrangements and applied to those parties w h o agreed to be covered by t h e m . 5 1 ECA, s. 1(2). 2 A. Geare, "The Proposed Employment Relations Act" (1993) 18 N.Z.J.Ind.Rel. 194 at 194. 3 Such as the Clerical Workers Award and the Meat Workers Award. The term "award" is misleading in that it suggests an arrangement imposed or awarded by a third party. In most cases, however, awards were negotiated by unions and employers. 4 LRA, ss. 160(2) and 165(b). 5 Prior to 1988 there were separate collective bargaining procedures for the public and private sectors. Following the enactment of the State Sector Act 1988, both sectors operated under a system of awards and 1 T h e broad applicat ion o f these awards and agreements had three principal consequences: centralised wage f ixing; the equalisation o f wages and other terms o f employment w i t h i n occupations; and the creation and enforcement o f settled wage relativities between occupations. Indeed, the overall trend in wage movement was generally set by only one or t w o key awards . 6 Thus, employees w i t h little bargaining power benefited f r o m deals struck by those in stronger bargaining positions, a process k n o w n as "comparat ive wage just ice" . U n i o n s enjoyed a posi t ion o f prominence under this system o f labour relations. In the first place, unions, rather than their members, were parties to awards and agreements. A c c o r d i n g l y , the ability o f most employees to enforce their terms o f employment stemmed f rom their u n i o n membership. 7 Secondly, a registered union enjoyed the exclusive and continuing right to negotiate o n behalf o f a certain sector o f the w o r k f o r c e . 8 Thus , no other potential representative was able to challenge a registered union 's status as authorised bargaining agent. A n d thirdly, compulsory unionism, whether imposed by statute or by u n i o n membership clauses, had existed in the private sector in N e w Zealand f r o m 1936 unti l the enactment o f the E C A , except for a br ie f period f r o m 1983 to 1985. 9 agreements. See J. Deeks & P. Boxall, Labour Relations in New Zealand (Auckland, Longman Paul, 1989) at 45. 6 Usually the Metal Trades Award or the Drivers Award. See P. Carroll & P. Tremewan, "Organising Employers: The Effects of the Act on Employers and the Auckland Employers Association", in Employment Contracts: New Zealand Experiences, R. Harbridge ed., (Wellington, Victoria University Press, 1993) [hereinafter "New Zealand Experiences"] 185 at 190. 7 For example, a grievance had to be instituted by a union on behalf of its member. However, in practice an employee who was not a union member still had a statutory right to the terms and conditions set out in the applicable award or agreement; but he or she was responsible for any associated grievance. See R. Harbridge, "Bargaining and the Employment Contracts Act: An Overview", in New Zealand Experiences, 31 at 34. 8 Usually an occupational sector, although this depended on the membership rule of the particular union. 9 A. Geare, The System of Industrial Relations in New Zealand, 2d rev. ed., (New Zealand, Butterworths, 1988) at 98-103. 2 T h e union membership scheme under the E C A ' s predecessor, the L a b o u r Relat ions A c t 1987 (the " L R A " ) , was based o n legally permitted compulsory membership clauses. These clauses had to be agreed u p o n by the union and employer parties to the particular award or agreement or inserted pursuant to a ballot o f employees . 1 0 S u c h clauses were c o m m o n place in the private sector, and, where present, compelled employees to j o i n the applicable u n i o n o r face d i s m i s s a l . 1 1 A s a result, dur ing the tenure o f the L R A most private sector w o r k e r s were union members. T h e same was true in the public sector, although in this sector high membership levels were due primari ly to traditional w o r k e r allegiance rather than compulsory membership clauses, w h i c h were rarely included in publ ic sector awards and agreements. 1 2 In terms o f specifics, there have been various estimates as to the degree o f u n i o n i s m i n N e w Zealand during the period preceding the E C A . Studies have suggested that membership as a percentage o f the total salaried, full t ime, w o r k force fluctuated between 60 and 73 percent during the period f r o m 1985 unti l M a y 1 9 9 1 . 1 3 T h e percentage o f full t ime w o r k e r s covered by collective awards and agreements was however, slightly higher than the percentage o f union members, due to the affect o f blanket c o v e r a g e . 1 4 Those remaining employees w h o were not union members and w h o were not covered by a col lect ive award or agreement, 1 5 were covered by c o m m o n law contracts o f service. 1 0 LRA, s. 61. 1 1 Such clauses were subject only to a very limited "conscience or deeply held personal conviction" exemption. See LRA, s. 83. 1 2 R. Harbridge & K. Hince, "Organising Workers: The Effects of the Act on Union Membership and Organisation", in New Zealand Experiences, 224 at 225-226. 13 Department of Labour Annual Reports (Wellington, Department of Labour, Various); Geare, supra note 9 at 81-82; R. Harbridge & K. Hince, "Unions and Union Membership in New Zealand 1985-1992" (1993) 18:3 N.Z.J.Ind.Rel. 352 at 355. 1 4 See R. Harbridge & K. Hince, "Bargaining and Worker Representation Under New Zealand's Employment Contracts Legislation: A Review After Two Years" (1994) 49:3 Les Presses de L'Universite Laval: Industrial Relations (Canada) 576. v 1 5 Most executives fell within this category. See Deeks & Boxall, supra note 5 at 71. 3 T h e primary purpose o f the bargaining regime that pre-dated the E C A was the p r o m o t i o n o f orderly col lective bargaining. T o this end, the L R A promoted u n i o n i s m , 1 6 and conci l iat ion and arbitration played a central role. A c c o r d i n g to Geare: W h i l e col lective bargaining was seen as desirable i f peaceful solutions c o u l d be reached, the state provided concil iators to chair the bargaining sessions. Strikes and lockouts were il legal and, i f negotiation failed, arbitration was provided to achieve a sett lement. 1 7 1.2 The Introduction of the Employment Contracts Act T h e E C A effected radical reform by establishing a free market system o f employment and labour relations. In doing so, the E C A swept away entirely the previous emphasis placed o n col lect ive bargaining and the associated support provided by conci l iat ion and arbitration, a system that had existed for 97 years. In substitution, there n o w exists a system o f employment and labour relations based on economic liberalism. This system endorses many o f the beliefs inherent in liberal economics including the primacy o f the individual and o f individual freedom, the inefficiency o f welfarism and the importance o f self-reliance. Consistent w i t h these beliefs, the E C A treats all employment as simply a matter o f contract to be negotiated in a free labour market. " F r e e " in this context essentially means a labour market that is not subject to state intervention or any legislatively imposed bargaining procedures. 1 6 Not only through granting unions the prominent status referred to previously, but also through provisions such as section 57 which guaranteed all union members a minimum of two paid union meetings per year and sections 56 and 196 which provided union officials with the right to enter worksites to interview members, inspect wage records and monitor compliance with existing awards and agreements. In reality, this broad right of access also provided unions with a valuable mechanism for organising. 1 7 Geare, supra note 2 at 194. The L R A did, however, introduce a degree of flexibility into the system by providing limited scope for strikes and lockouts, and by making arbitration voluntary provided both parties agreed to conciliation. 4 B a r g a i n i n g under the E C A is notable for three reasons: the status o f bargaining representatives; the form o f bargaining and employment contracts; and the manner o f bargaining. The Status of Bargaining Representatives A v i e w central to the E C A is that employment contracts are arrangements between employers and employees, not between unions and employers or their representatives as was the case under the L R A . 1 8 W h i l e bargaining representatives may be engaged by either party, the previous system o f compulsory unionism has been a b o l i s h e d . 1 9 M o r e o v e r , where a representative is engaged, that representative negotiates only on behalf o f those w h o have expressly appointed it. The sections in the L R A that granted a registered u n i o n the exclusive right to negotiate o n behalf o f a particular group o f employees, and that extended the coverage o f awards and agreements to all employees in a particular sector o f the workforce , have not been replicated i n the E C A . 2 0 U n i o n s must n o w actively recruit, and retain, members, and in so doing, compete w i t h other prospective representatives. 2 1 M o r e o v e r , membership, once secured, remains vulnerable, for union membership is revocable at w i l l by an employee . 2 2 A s a result o f these changes, In order for a union to be a party to an employment contract under the ECA, both the employer(s) and employee(s) bound by the contract must agree. ECA, s. 17. 1 9 For example, an employee cannot be compelled by any contract or arrangement to join a union. ECA, s. 6. Accordingly, the compulsory membership clauses that operated under the LRA are no longer lawful. 2 0 Nor are "majority votes' and 'bargaining units', concepts central to labour relations in Canada and the United States of America, of any relevance under the ECA. 2 1 Significant competition for members has developed between unions, with a number of unions now representing employees who would traditionally have fallen outside their membership rules. As a result, it is not uncommon for more than one union to represent employees of the same work classification in the same workplace. Cf., the position in British Columbia, where certification provides a particular union with the exclusive right to represent all employees in the applicable bargaining unit (some of whom may not be union members at all). 2 2 Thus, successfully negotiating a collective contract in no way guarantees a union the right to act in any renewal negotiations that may occur. Rather, the securing of ongoing work depends on a union retaining membership. Again, this can be contrasted with the position in British Columbia. Once certified, a union remains the exclusive bargaining representative for all employees in the bargaining unit for all future 5 representation, bargaining and the content o f an employment contract are n o w the concern o f each individual employee. Significantly, w i t h the exception o f one transitional provis ion, the term " u n i o n " does not appear at all in the E C A . 2 3 Reference is made only to the generic terms "representatives" and "employee organisations". W h i l e an employee's representative may be a union, a representative for the purposes o f the E C A can be any individual , group or organisat ion . 2 4 A c c o r d i n g to the Government in power at the time the E C A was enacted, the use o f these generic terms reflected the freedom o f employees to appoint any type o f bargaining agent, not just u n i o n s . 2 5 Others suggest the omiss ion o f the term " u n i o n " reflected a deliberate strategy o n the part o f the Government to direct labour relations away f rom the tradit ional institutions o f unions and collective bargaining. 2 6 Quite clearly, then, the status o f unions (and all representatives) under the E C A is secondary to that o f employers and employees, and far less significant than under previous legislation. A s Harbr idge describes: W h i l s t unions are free to play a role in industrial relations under the [ E C A ] , they no longer have automatic and exclusive rights in the w o r k p l a c e . 2 7 negotiations, unless and until the union is decertified or the unit ceases to exist (by reason, for example, of employer liquidation). 2 3 This is a startling turnaround, when one considers that nearly a third of all the sections in the LRA dealt with aspects of unionism. 2 4 Subject only to the right of the other negotiating party to object where a nominated representative has committed one of a number of prescribed criminal offences. ECA, s. 11. 2 5 See infra note 160 at 59. 2 5 J. Kelsey, The New Zealand Experiment: A World Model For Structural Adjustment? (Auckland, Auckland University Press, 1995) [hereinafter, "New Zealand Experiment"] at 181-183; Harbridge & Hince; supra note 12 at 225; W. Grills, "The Impact of the Employment Contracts Act on Labour Law: Implications For Unions" (1994) 19 N.Z.J.Ind.Rel. 85 at 89. 2 7 Harbridge & Hince, supra note 12 at 230. Consistent with the reduced status of unions, the provisions in the LRA which guaranteed paid union meetings, and general union access to worksites, have not been replicated in the ECA. Moreover, unions have no privileged position under other workplace legislation, such as the Health and Safety in Employment Act 1992 (the Act which governs standards of safety in all workplaces). In contrast, unions enjoy the automatic right to be involved in certain health and safety issues in British Columbia. For example, where an inspector from the Workers Compensation Board 6 The Form of Bargaining and Employment Contracts T h e E C A o n its face expresses no preference for the form o f bargaining or the form o f employment contract to be entered into. This is a matter o f " c h o i c e " for the negotiating parties, the t w o options i n both cases being "col lect ive" or " i n d i v i d u a l " . T h i s choice is set out i n section 9 o f the E C A , the material por t ion o f w h i c h provides: (a) A n y employee or employer, in negotiating for an employment contract, may conduct the negotiations on his or her o w n behalf or may choose to be represented by another person, group, or organisation; and (b) A p p r o p r i a t e arrangements to govern the employment relationship may be prov ided by an individual employment contract or a collective employment contract, w i t h the type o f contract and the contents o f the contract being, in each case, a matter for negotiation... ,28 Whether the "neutral i ty" provided for in section 9 (as regards the f o r m o f bargaining and contract to be entered into) actually exists i n practice is, however, a source o f considerable debate. A s a number o f commentators have noted, several provisions w i t h i n the E C A have the effect o f promot ing individual bargaining and contracts at the expense o f their col lect ive counterparts . 2 9 The most notable o f these provisions is section 19(4) w h i c h inspects a worker's place of work, that worker is entitled to have a representative accompany the inspector (as is the employer). Where the operation is unionised, the worker's representative must be selected by the union. (See the Workers Compensation Act (R.S.B.C. 1996, c. 492, s. 72(4))). Similarly, occupational health and safety committees must have at least two members "chosen by and representing the workers" (two worker representatives is the minimum in a committee of four persons). (See the Occupational Health & Safety Regulations (BC Regulations, 296/97, reg. 3.5)). Thus, in unionised operations employees have the right to appoint union officials to these committees. 2 8 Emphasis added. It is permissible, however, for an employee and employer to agree that some of the employee's terms of employment will be embodied in a collective contract and others in an individual contract. (See ECA, s. 19(2)). Remarkably, when the ECA was first mooted, the Government of the day contemplated giving individual contracts priority over collective contracts. See E. Dannin, Working Free: The Origins and Impact of New Zealand's Employment Contracts Act (Auckland, Auckland University Press, 1997) [hereinafter "Working Free"] at 98. This request was, however, viewed as too controversial, given the emphasis on collective bargaining that operated at the time. 2 9 See e.g., I. McAndrew & M. Ballard, "Negotiation and Dictation in Employment Contract Formation In New Zealand" (1995) 20:2 N.Z.J.Ind.Rel. 119 at 121; Dannin, Working Free, at 231; Harbridge, supra note 7 at 47; Grills, supra note 26 at 88-89; Horn et al, Employment Contracts, Employment Contracts Act and Indexes (Wellington, Brookers, 1997) [hereinafter "Horn"] at 1B-5. 7 provides that u p o n the expiry o f a collective contract, the employment relationship i n question converts to a series o f identical individual contracts. Sect ion 2 o f the E C A defines a collective employment contract as one that covers at least one employer and at least t w o employees and an individual employment contract as one that covers one employee and one employer. Notably , however, the form o f the contract entered into does not depend on the form o f bargaining that may have preceded it. F o r example, employees could collectivise and seek to negotiate a collective contract but the bargaining p o w e r and stance o f their employer may be such that the employees are compel led to settle instead for individual contracts. I n short, col lect ive act ion w i l l not necessarily result i n a collective o u t c o m e . 3 0 In the same vein, an employer can sign employees to a collective contract by approaching each o f them i n d i v i d u a l l y . 3 1 Addi t ional ly , a collective contract may contain a " n e w parties" clause w h i c h provides that a employee starting employment after the commencement date o f the contract may become a party to that contract. W h e r e a clause o f this nature applies, it is possible for an employee to become a party to a col lect ive employment contract without being, or having to become, a member o f the col lect ive that may have negotiated i t . 3 2 3 0 In contrast, once a union has been certified in British Columbia, collective bargaining commences and, barring decertification, a collective agreement will result. 3 1 I. McAndrew, "The Process of Developing Employment Contracts: The Management Experience", in New Zealand Experiences, 165 at 172-173. As Boyd points out, many current collective contracts are nothing more than aggregations of individual agreements. See A. Boyd, "The Freedom of Association in the Employment Contracts Act 1991: What has it Meant for Trade Unions and the Process of Collective Bargaining in New Zealand" (1997) 28 Cal.West.Int.L.J. 65 at 70. 3 2 Such clauses are expressly permitted by section 21 of the ECA. By the same token, where an employer is not contractually obliged to offer an existing contract to a new recruit, the employer is free to engage the new employee on terms which differ from those specified in the contract(s) of its existing employees. A number of employers have used this process as a means of engaging new staff on salaries which are inferior to those of existing employees. See e.g., H. Roth, "Chronicle" (1992) 17:2 N.Z.J.Ind.Rel. 247 at 248; E. Rasmussen, "Chronical" (1997) 22:1 N.Z.J.Ind.Rel. I l l at 112 & 115. 8 T h e reference to " c h o i c e " in section 9 o f the E C A assumes an individual employee has sufficient p o w e r to choose the form o f bargaining and contract he or she prefers. M o r e o v e r , by not expressing any preference for the form o f bargaining to be entered into, the E C A presumes that negotiations between an individual employee and his or her employer w i l l be as meaningful as those between an employer and a col lect ive o f employees represented by a bargaining agent. In essence, the E C A assumes equality between an employee and an employer without the need for state intervention or col lect ive barga in ing . 3 3 The Manner of Bargaining T h e third notable feature o f the E C A in relation to bargaining, is the absence o f any mandatory or prescribed procedures. The A c t gives no guidance as to h o w employment contracts are to be negotiated, and, as such, leaves the parties to determine the procedure for bargaining in each case. A s one adjudicator has noted: T h e A c t generally contemplates that there w i l l be 'negotiat ion' . That expression is used several times w i t h reference to the formation o f employment contracts. There are, however, no regulations, rules or other machinery provis ions as to the ' h o w ' , ' w h e n ' , 'where ' and ' for h o w l o n g ' i n respect o f the negotiation p r o c e s s . 3 4 A consequence o f this laissez faire phi losophy is that the E C A does not, in fact, require parties to bargain at all. In the absence o f any obligation o f this k i n d , the N e w Zealand C o u r t o f A p p e a l has held that a party has the right to refuse to b a r g a i n , 3 5 stating, for 3 3 Cf., the US National Labor Relations Act (29 U.S.C. s. 151) which seeks to establish equality of bargaining power by collectivising employees and only then assuming equality exists. See E. Dannin, "Bargaining under New Zealand's Employment Contracts Act: The Problem of Coercion" (1996) 17 Comp. Lab.L.J. 455 at 464. 34 Buchanan v. Rodney District Council [1992] 2 ERNZ 578 (E.T.). 35 Eketone v. Alliance Textiles [1993] 2 ERNZ 783 (C.A.). [Hereinafter "Eketone"]. 9 example, that " a n employer is free not to negotiate w i t h a n y o n e . " 3 6 T h e E m p l o y m e n t C o u r t has taken an identical v iew: T h e legal posit ion is quite simple: employees are entitled to appoint a representative and where they do so the employer m u s t . . . negotiate, if at all, w i t h that representative. 3 7 A s a result, an employer can lawfully proffer a proposal on the basis o f "take it or leave i t " , refuse to discuss the matter at al l , and i f any resistance arises, immediately l o c k out those employees w h o have refused to accede to its demands. 3 8 Those employees w h o are l o c k e d out w i l l then have the right to return to w o r k only i f they accept their employer 's proposal or i f their employer voluntari ly chooses to end the l o c k out, something the employer is under no lawful obligation to d o . 3 9 M o r e o v e r , i f parties do choose to bargain, there is no obligation to bargain in g o o d faith. A s K i e l y notes: Negot iat ions for employment contracts proceed on the same basis as negotiations for any other contract, such as negotiations for an overdraft at the bank, or 36 Ibid, at 787. The decisions of the Court of Appeal in this context are particularly significant for two reasons. First, they bind the New Zealand Employment Court and Employment Tribunal, the institutions with exclusive jurisdiction in New Zealand to hear employment related claims at first instance. And secondly, there is no right of appeal to the Privy Council on matters covered by the ECA. See De Morgan v. Director General of Social Welfare [1997] 3 NZLR 385 (P.C). 37 Service Workers Union ofAotearoa Inc v. Southern Pacific Hotel Corporation (NZ) Ltd [1993] 2 ERNZ 513. [Emphasis added]. 3 8 A practise that has been judicially condoned in numerous cases. See e.g., Hyndman v. Air New Zealand Ltd [1992] 1 ERNZ 820 (E.C.); Hawtin v. Slellerup Industrial Ltd [1992] 2 ERNZ 500 (E.C.); Northern Distribution Union Inc v. 3 Guys Ltd [1992] 3 ERNZ 903 (E.C.). Note however, that the right to strike or lockout is not entirely unfettered. In order to be lawful under the ECA, a strike or lockout must relate to the negotiation of a collective contract; it must not occur while a collective contract is still in force; and it must not relate to a personal grievance, a dispute of right, matters dealing with freedom of association, or the issue of whether a collective contract will bind more than one employer. If the strike or lockout is to occur in an essential service, the requisite notice must also be given. See ECA, ss. 63-64. 3 9 Notably, the right to return to work is also subject to an employer's continuing right to effect restructuring and dismiss a striking employee on the basis of redundancy. See e.g., N. Newland, "Hawera Meatworks to be Dismantled: Deal Leaves Striking Staff Out of Work" (1996) The Daily News (NZ), 22 October, 4. 10 negotiations for a lease w i t h the landlord. There is no obligation to conduct these negotiations i n g o o d faith ... E m p l o y e r s can adopt a ' take it o r leave i t ' approach to negotiations, and the C o u r t w i l l not inquire as to the reasonableness o f the employer 's att i tude. 4 0 T h e current free market approach to bargaining is rendered complete by the E C A ' s failure to prescribe any procedures for resolving bargaining impasses, other than economic sanctions (strikes and lockouts) . Consistent w i t h its free market phi losophy, the E C A discarded the conci l iat ion and arbitration mechanisms incorporated in the previous legislation, so that market forces could determine the manner and outcome o f bargaining i n each case. In effect, the E C A represents the complete el imination o f the State's role as moderator and facilitator o f the bargaining process, the theory being that bargaining is n o w to be facilitated, and moderated, by the market place. 1.3 Views and Consequences of the E C A A s w i t h most radical legislative reform, the E C A polarised its supporters and c r i t i c s . 4 1 M a n y w i t h business interests favoured the new free market philosophy. A c c o r d i n g to B i l l B i r c h , the M i n i s t e r o f L a b o u r responsible for introducing the E C A , a free market system o f labour relations w o u l d eliminate inefficiencies and foster wide-spread prosperity: That is what labour market reform is all about - increased product iv i ty and better ways o f doing things, leading to better output, more exports, better profits, a higher standard o f l iv ing, and better wages. That is the b o t t o m line. It is time for us to seek improvements i n o u r w o r k arrangements so that w e are more efficient, more productive, and more export or ientated. 4 2 4 0 P. Kiely & A. Caisley, "The Legal Status of Bargaining under the Employment Contracts Act 1991: A Review of Recent Cases", in New Zealand Experiences, 53 at 68. 4 1 For discussion on the debate that surrounded the introduction of the ECA, and how it was reported in the media, see J. Scott, "Contesting Symbolic Space: The Struggle over the Employment Contracts Act 1991" (1996) 21:3 N.Z.J.Ind.Rel. 277. 4 2 Hansard, Parliamentary Debates of New Zealand (1991) 23 April, 1429. See also, B. Birch, "A Stepping Stone on the Path to Prosperity" (1991) The Dominion (N.Z.), 1 May, 10. 11 T h e adopt ion o f market flexibility also found favour w i t h various employer organisations, a number o f w h o m lobbied strongly for the E C A . T h e N e w Zealand E m p l o y e r s ' Federat ion (the " N Z E F " ) explained h o w it saw the legislation w o r k i n g : T h e E m p l o y m e n t Contracts A c t has introduced absolute flexibility into labour relations. Irrespective o f whether they employ one person or one thousand people, indiv idual employers have the ability - indeed, the responsibility - to w o r k w i t h their staff to reach an agreement that meets their joint needs and aspirations. T h e focus must be o n w o r k i n g together, rather than w o r k i n g to the dictates o f a bland, impersonal document fixed nationally and without individual employers ' input or responsibi l i ty . 4 3 This " v i s i o n " was endorsed by the N e w Zealand Business Roundtable (the " N Z B R T " ) , 4 4 w h i c h had argued that the institutional arrangements o f collective bargaining, and the legal procedures o f conci l iat ion, arbitration and dispute settlement i n the L R A had interfered w i t h the effective operation o f the labour market . 4 5 T h e E C A was, in its v iew, a considerable improvement o n the L R A . L i k e w i s e , the E C A was heralded among international business groups as inspired and innovative. Reports in the Economist referred to N e w Zealand's "brave r e c i p e " , 4 6 and its "trai l -blazing r e f o r m s " , 4 7 and to the E C A as "an international model for economic r e f o r m . " 4 8 S imilar accolades appeared in the Times*9 the Wall Street Journal,iQ and the 4 3 A. Knowles, "We've Arrived But the Work's Just Starting", The Employer (Wellington, The New Zealand Employers Federation, 1991) June, 1 at 1. 4 4 A lobby group representing large companies and employers in New Zealand. 4 5 Deeks & Boxall, supra note 5 at 127. This was a viewed shared by the New Zealand Treasury (see Harbridge & Hince, supra note 12 at 236) but not necessarily by many small New Zealand employers (see I. McAndrew & P. Hursthouse, "Southern Employers on Enterprise Bargaining" (1990) 15 N.Z.J.Ind.Rel. 117 at 127). 4 6 Economist, (1990) 3 November, 19. 47 Economist, (1990) 13 November, 155. ™Ibid. 4 9 "New Zealand Strides Down the Hard Road to Economic Recovery" (1992) 22 June. 5 0 "Kiwi School of Economics" (1994) 14 December. 12 Globe and Mail51 A s it transpires, several jurisdict ions have either replicated the E C A , 5 2 or are considering doing s o . 5 3 In stark contrast, many employees in N e w Zealand v iewed the E C A as legislation that w o u l d undermine their collectives, wages and j o b security. A t the time the E C A was enacted, 500,000 people (a sixth o f the population) t o o k part i n demonstrations and strikes protesting against the leg is lat ion. 5 4 A c c o r d i n g to critics o f the E C A , its apparently "neutra l" stance in respect o f bargaining w o u l d actually undermine employees because in many instances individuals w o u l d have insufficient power to insist on meaningful bargaining. A s opposi t ion M e m b e r o f Parliament Lianne D a l z i e l argued: A l l that [the E C A ] w i l l do is establish unilateral management control over the w a y i n w h i c h labour is used rather than providing positive measures that are needed so that the w o r k f o r c e can adjust and respond to the economic changes in a modern democratic society . 5 5 A s it turns out, the E C A has dramatically affected bargaining in N e w Zealand. A c c u r a t e l y summarising that affect is, however, no easy task. Unfortunately, the E C A provides for no central data col lection. O n l y employers w h o are parties to collective contracts cover ing twenty or more employees are obliged to file those contracts w i t h the 5 1 "Radically Sensible New Zealand" (1994) August. 5 2 See e.g., the Australian Workplace Relations Act 1996 (Cth.); the Western Australia Workplace Agreements Act 1993; the Victoria (Australia) Employee Relations Act 1992. See also, T. MacDermott, "Australian Labour Law Reform: The New Paradigm" (1998) 6:1 Can.Lab.& Emp.L.J. 127; R. Mitchell & R. Naughton, "Radical Labour Law Reform and the Demise of the Victorian Industrial Relations Systems" (1994) 19:3 N.Z.J.Ind.Rel. 275; R. Fells & C. Mulvey, "Changes in Western Australian Industrial Relations" (1994) 1.9:3 N.Z.J.Ind.Rel. 289. 5 3 Finland, The Netherlands, Germany, Sweden, Japan and Alberta (Canada) are all reported to be considering models based on the ECA. See Dannin, Working Free, at 4; E. Dannin, "We Can't Overcome? A Case Study of Freedom of Contract and Labor Law Reform" (1995) 16 Berkeley J.Emp. & Lab.L. 1 [hereinafter, ""We Can't Overcome"" at 7. 5 4 Dannin, "We Can't Overcome", at 82-84. 5 5 Hansard, Parliamentary Debates of New Zealand (1990) 19 December, 494-495. See also E. Dannin, "Labor Law Reform in New Zealand" (1992) 13:1 N.Y.L.S.Int. & Comp.L. 1 at 38-39. 13 Department o f L a b o u r . 5 6 A s the majority o f N e w Zealand w o r k sites are considerably smaller than this, the information filed presents only part o f the s t o r y . 5 7 T o make matters worse, there is no w a y for the Government to k n o w whether all large employers are c o m p l y i n g w i t h this filing requirement, nor have any steps been taken to enforce c o m p l i a n c e . 5 8 It is, then, difficult to assess the accuracy o f the Department 's statistics, a deficiency noted by a number o f researchers. 5 9 A s a result, it has been left largely to private studies to ascertain the consequences o f the E C A . Y e t , i n some instances, these studies have been o f questionable value. A c c o r d i n g to D a n n i n , a number o f recent surveys have reflected the pol i t ical interests o f those w h o commiss ioned them and have failed " t o meet w i t h basic research standards." 6 0 T h e scarcity o f objective and reliable data has also been noted by Harbridge: 5 6 ECA, s. 24. C.f, the LRA under which all awards and agreements had to be filed with the Department of Labour. The abolishment of this requirement was deliberate, and reflected the Government's desire that employment contracts should be negotiated to suit the requirements of a particular worksite, and not on the basis of industry or national relativities. See Harbridge, supra note 7 at 45. 5 7 More than a quarter of all New Zealand employees work in worksites of less than 10 employees (see J. Kelsey, "Employment and Union Issues in New Zealand, 12 Years On" (1997) 28 Cal.West.Int.L.J. 253 at 261), while the average New Zealand worksite comprises only eleven employees (see D. Harvey, "The Unions and the Government: The Rise and Fall of the Compact", in J. Deeks & N. Perry eds., Controlling Interests: Business, the State and Society in New Zealand (Auckland, Auckland University Press, 1992) at 63). This average is, however, greatly affected by a few large employers. Indeed, over 85% of all enterprises have less than six employees, with a further 7% having between 6 and 9 (see Statistics New Zealand, Business Activity Statistics 1997 (Wellington, Statistics New Zealand, 1997) at 96. Interestingly, British Columbia also has a high proportion of small workplaces. According to a 1994 report, 73% of all enterprises in British Columbia have less than 5 employees, and a further 18% have 5-19 employees. See M. Thompson, Rights and Responsibilities in a Changing Workplace: A Review of Employment Standards in British Columbia (Ministry of Skills, Training and Labour, 1993) at 145. 58 Report of the Minority of the Labour Select Committee on the Inquiry into the Effects of the Employment Contracts Act on the New Zealand Labour Market (Wellington, 1993) [hereinafter the "Minority Reporf] at 23. 5 9 Dannin describes the absence of data as "truly appalling" (Dannin, "We Can't Overcome", at 165), while Hughes refers to a "significant information gap". See J. Hughes, "Personal Grievances", in New Zealand Experiences 89 at 128. Even the International Labour Organisation cited the absence of objective data as a significant limitation in its study of New Zealand labour relations during the period 1992-1994. See infra note 160, at 87. 6 0 Dannin, Working Free, at 181. 14 There is a great shortage o f knowledge about what is actually happening in the labour market. Rhetor ic and anecdotal evidence supporting one v i e w or another have become the primary mechanisms for evaluating the legislation. U n i o n s have a bag o f stories about hardships experienced by individual workers; the M i n i s t e r o f L a b o u r has his bag o f stories showing h o w successful the legislation has been; and employers organisations have a selection o f kites they fly f r o m time to time to see whether further deregulation can be achieved. 6 1 A c c u r a t e l y summarising the affects o f the E C A o n bargaining is also made difficult by the fact that a number o f the legislative and economic initiatives introduced in the 1970s and 1980s prov ided some impetus for what f o l l o w e d . 6 2 H o w e v e r , despite these difficulties, it can be fairly asserted that the E C A has resulted in, or contributed significantly to, the f o l l o w i n g bargaining processes and outcomes: 1. T h e focus o f bargaining has shifted f rom national and occupational agreements to individual w o r k sites. A s a result, there has been a dramatic decline in the number o f mult i-employer and industry agreements. U n d e r the L R A , over 7 0 % o f N e w Zea land employees were employed under multi-employer awards and agreements. 6 3 B y 1995 (within 5 years), this figure had dropped to 1 4 % , 6 4 and by 6 1 Harbridge, supra note 7 at 49. See also E. Rasmussen & J. Deeks, "Contested Outcomes: Assessing the Impacts of the Employment Contracts Act" (1997) 28 Cal.West.Int.L.J. 275 at 275, B. Easton, "The Economic Impact of the Employment Contracts Act" (1997) 28 Cal.Westlnt.L.J. 209 at 217. 6 2 Including for example, the corporatisation and privatisation of many State activities (including Telecom, NZ Rail and the Bank of New Zealand) which resulted in 35,000 redundancies; the elimination of export and domestic trade subsidies and tariffs; the restructuring of the taxation system (including the introduction of a goods and services tax); and the reduction of Government spending in health, education, community services, housing and the like. For discussion of these reforms see e.g., A. Sharp, ed., Leap into the Dark: The Changing Role of the State in New Zealand Since 1984 (Auckland, Auckland University Press, 1994); B. Jesson, Fragments of Labour: The Story Behind the Labour Government (Auckland, Penguine, 1989); I. Duncan & A. Bollard, Corporatisation and Privatisation: Lessons From New Zealand (Auckland, Oxford University Press, 1992); S. Walker, Rogernomics: Reshaping New Zealand's Economy (Wellington, GP Books, 1989). For discussion on the reforms dealing specifically with collective bargaining see G. Anderson, "Developments in the Legal Regulation of Collective Bargaining in New Zealand" (1990) 3 A.J.L.L. 227. 6 3 R. Mackay ed., Mazengarbs Employment Law (Wellington, Butterworths, 1997) [hereinafter "Mazengarbs"] at A/353B. 6 4 R. Harbridge & A. Honeybone, "External Legitimacy of Unions: Trends in New Zealand" (1996) 17 J.Lab.Res. 425 at 433-435. 15 1996, to just 7%. A c c o r d i n g to figures released by the Department o f L a b o u r i n February 1998, n o w only 2 % o f the 1621 active collective contracts o n its files cover more than one employer . 6 6 2. M o s t N e w Zealand employees are n o w employed on individual , rather than collective, contracts . 6 7 Estimates o f individual contract coverage range as high as 7 8 % o f the salaried w o r k f o r c e . 6 8 This represents a marked turn around f r o m the posi t ion under the L R A when, at times, as few as 2 8 % o f the w o r k f o r c e were covered by individual contracts o f service . 6 9 Department of Labour - Industrial Relations Service, Survey of Labour Market Adjustment Under the Employment Contracts Act (Wellington, Department of Labour, August, 1997) [hereinafter, "Department of Labour 1997 Survey"] at 2. 6 6 Department of Labour, Contract-The Report on Current Industrial Relations in New Zealand (Wellington, Department of Labour, 1998) Vol. 24, at 1. According to freemarket advocates, this reduction is the result of employers and employees choosing not to enter into multi-employer contracts. (See e.g., Roger Kerr, "The New Zealand Employment Contracts Act: Its Enactment, Performance, and Implications" (1997) 28 Cal.West.Int.J.L. 89 at 95). More likely, it is employers rather than employees exercising this choice, particularly given that employees cannot lawfully strike to secure such contracts (see infra notes 697-698). 6 7 A trend which is consistent with international developments. As Lord Wedderburn describes, there is an increasing paradox between "the global rise of multinational employers in international coalitions of collective capital" and "the decollectivisation of their employees". See Lord Wedderburn, Labour Law and Freedom: Further Essays in Labour Law (London, Lawrence & Wishart, 1995) at 286-287. 6 8 New Zealand Council of Trade Unions, Post-Election Priorities - A Union View (Wellington, Council of Trade Unions, 1996) at 62-63. This estimate accords with the findings of Harbridge, Rasmussen, and Boxall. See R. Harbridge & A. Crawford, "The Impact of New Zealand's Employment Contracts Act on Industrial relations" (1997) 28 Cal.West.Int.L.J. 235 at 249-250; Rasmussen & Deeks, supra note 61 at 279; P. Boxall, "Models of Employment and Labour Productivity in New Zealand: An Interpretation of Change Since the Employment Contracts Act" (1997) 22:1 N.Z.J.Ind.Rel. 22 at 26. C.f, the Department of Labour's account that only 49% of employees are on individual contracts. See Department of Labour 1997 Survey, at 18. Notably, however, the Department acknowledged that it could not rule out significant bias in its data, due to a response rate of just 42%. (See Department of Labour 1997 Survey, at 15). 6 9 The present coverage of collective contracts (between 20% and 30% of the workforce) may, however, overstate the present bargaining strength of unions in New Zealand. As some commentators have noted, a number of collective contracts have been renewed because this form of contract suited the employers in question, and not because their employees had the bargaining power to insist on this form of outcome. See e.g., A. Pringle, "The Pursuit of Flexibility in the New Zealand Supermarket: The Employment Contracts Act, Continuities and Discontinuities" (1993) 18 N.Z.J.Ind.Rel. 306 at 321; L. Hill, & R. Du Plessis, "Tracing the Similarities, Identifying the Differences: Woman and the Employment Contracts Act" (1993) 18:1 N.Z.J.Ind.Rel. 31 at 41. 16 3. U n i o n membership has fallen considerably. A c c o r d i n g to the Department o f L a b o u r , i n M a y 1991, 603,118 employees belonged to u n i o n s . 7 0 B y December 1997 this figure had fallen to 3 2 7 , 8 0 0 7 1 (a 4 6 % drop in membership and, even more significantly, a 5 4 % drop in union density, in just six and a hal f y e a r s ) . 7 2 4. N o t surprisingly, considerable restructuring has occurred w i t h i n and among unions. V a r i o u s unions have ceased to ex is t , 7 3 some have split into separate organisat ions, 7 4 whi le others have amalgamated. 7 5 F r i c t i o n w i t h i n u n i o n hierarchies has also lead to a number o f unions w i t h d r a w i n g f r o m the C o u n c i l o f Trade U n i o n s to form the N e w Zealand Trade U n i o n F e d e r a t i o n . 7 6 7 0 A figure which equated to 65% of the total, full time, salaried workforce (see Harbridge & Hince, supra note 12 at 228), and 41.5% of the total full time and part time salaried workforce (see A. Crawford, et al, "Unions and Union Membership in New Zealand: Annual Review For 1996" (1997) 22 N.Z.J.Ind.Rel. 212). 7 1 A level which equates to only 19.2% of the total full time and part time workforce. See Crawford et al, Unions and Union Membership in New Zealand: Annual Review for 1997 (Unpublished Research Note, July 1998) at 4. The difference in union membership as a percentage of the workforce (19.2%) and the coverage of collective contracts as a percentage of the workforce (around 25%) can be explained largely by "free-riding" (non-union members enjoying the benefits of a collectively negotiated contract). See R. Harbridge et al, Employment Contracts: Bargaining Trends & Employment Law Update 1996/1997 (Wellington, Victoria University, 1997) at 7. 7 2 According to Roger Kerr, this decline is the result of employees freely choosing not to join unions (see Kerr, supra note 66 at 96). While some of the reduction in membership will no doubt be due to such decision making, much of the decline is the result of union exclusion from workplaces, and employees becoming disillusioned with their union's inability to engage with employers, all of whom enjoy the lawful right to refuse to negotiate. See infra note 724-728 and accompanying text. 7 3 Such as the 18,000 member Communication and Energy Workers Union (Dannin, Working Free, at 282); and the 40,000 member Clerical Workers Union (M. Gay & M. MacLean, "Six Years Hard Labour: Workers and Unions under the Employment Contracts Act" (1997) 28 Cal.West.Int.L.J. 45 at 53). 7 4 For example, 300 customs workers resigned from the Public Service Workers Association ("PSA") in 1991 and formed the Customs Officers Association, while 1000 psychiatric workers resigned in 1992 and formed the National Union of Public Employees. See Dannin, Working Free, at 281-282. 7 5 See e.g., the New Zealand Engineers Union which merged with the Printing, Packaging and Media Union to form a membership of 60,000 (see Dannin, Working Free, at 292) and the merger of the Combined Union of Railway Workers, the National Union of Railway Workers and the Harbour Workers Union, to form the Maritime Transport Union (see A. Crawford, et al, "Unions and Union Membership in New Zealand: Annual Review For 1995" (1996) 21:2 N.Z.J.Ind.Rel. 188 at 192). 7 6 For a discussion on this split see Gay & MacLean, supra note 73; Kelsey, New Zealand Experiment, at 186-187. 17 5. Consistent w i t h the decline in multi-employer agreements, unions are n o w conduct ing significantly more negotiations than they were before the E C A was enacted. T h e N a t i o n a l Dis tr ibut ion U n i o n , for example, conducted in the order o f 700 negotiations during the year after the E C A was passed, compared to 55 during the year be fore . 7 7 Increasing workloads , in combination w i t h falling membership dues, have meant that many unions have found it impossible to represent all existing members. A s a result, increasing numbers o f employees are los ing representation, particularly those in small and isolated w o r k sites, 7 8 and those in the secondary labour m a r k e t . 7 9 A s Kelsey has noted, "most unions [have] stopped organising in workplaces o f less than 10, effectively abandoning a quarter o f the w o r k f o r c e . " 8 0 6. A l t h o u g h unions are n o w conducting more negotiations, most employment contracts are formed without any u n i o n involvement. A c c o r d i n g to a study by M c A n d r e w conducted in 1992, unions were involved in the negotiations o f only 2 5 % o f col lective employment contracts . 8 1 A survey by the N Z E F confirmed this f i n d i n g . 8 2 A l t h o u g h this percentage n o w appears to have increased, 8 3 it is, in fact, Kelsey, supra note 57 at 261. 7 8 Dannin, "We Can't Overcome", at 102; J. Hector, et al, "Industrial Relations Bargaining in the Retail Non-Food Sector: 1991-1992" (1993) 18:3 N.Z.J.Ind.Rel. 326 at 340. 7 9 The secondary labour market comprises low skilled, low paid, employees such as many of those employed in the retail, cleaning, clerical and child care industries. Conversely, the primary labour market comprises highly paid and highly skilled employees: See J. Sayers, "Women, the Employment Contracts Act, and Labour Flexibility", in New Zealand Experiences, 210. 8 0 Kelsey, supra note 57 at 261. This view is supported by Gilson, whose research indicates that union coverage in New Zealand is positively correlated to organisational size. See C. Gilson & T. Wagar, "The Impact of the New Zealand Employment Contracts Act on Individual Contracting: Measuring Organizational Performance" (1997) 28 Cal.West.Int.L.J. 221 at 230 (note 29). Interestingly, in British Columbia bargaining units often comprise less than ten employees, and, by definition, a bargaining unit can comprise one employee. See BC Code, s. 1 (definition of "unit"). 8 1 McAndrew, supra note 30, at 180. 8 2 According to the NZEF, in 1992-1993 unions were used as bargaining agents in only a third of all collective contracts. New Zealand Employers Federation Members Employment Contracts Survey, April 1992 (cited in Carroll & Tremewan, supra note 6 at 187). 8 3 According to the Department of Labour, as at the end of 1997, unions had been involved in 68% of the active collective contracts on its files. (See Department of Labour, Contract-The Report on Current 18 misleading to refer to this trend as an "increase", given the continuing decline in the overal l number o f collective contracts . 8 4 Addi t ional ly , according to W h a t m a n , as o f late 1993, unions were involved in the negotiation o f less than 6 % o f individual employment contracts , 8 5 a trend w h i c h has c o n t i n u e d . 8 6 A c c o r d i n g l y , based o n this data, less than 2 7 % o f all employment contracts are n o w negotiated by unions. 7. N e w Zealand has experienced the consol idation o f a bifurcated labour m a r k e t . 8 7 Those employees w i t h bargaining p o w e r (usually those in the primary labour market) are no longer l imited by inter-occupational relativities. A n d those i n the secondary labour market have largely been left b e h i n d . 8 8 A s Harbr idge argues: [T]here can be no doubt that a bifurcated labour market has been further developed w i t h the industrially strong becoming stronger and the industrially weak becoming even weaker. A n y concept o f comparative employment justice has gone and the very disparate findings indicate that 'market rules' are the sole arbitrator o f employment negotiations. That for N e w Zealand is an astonishing t u r n a r o u n d . 8 9 Industrial Relations in New Zealand (Wellington, Department of Labour, 1998) Vol. 24, at 1). Harbridge suggests a higher degree of involvement, estimating that 87% of collective contracts are now negotiated by unions. See R. Harbridge et al, Employment Contracts: Bargaining Trends & Employment Law Update 1996/1997 (Wellington, Victoria University, 1997) at 14. 8 4 These figures suggest that collective contracts are tending to be retained only where a union has a strong presence in a particular workplace. 8 5 R. Whatman, et al, "Labour Market Adjustment under the ECA" (1994) 19:1 N.Z.J.Ind.Rel. 53 at 60. 8 6 The Department of Labour 1997 Survey (produced in August 1997) reported that unions were involved in the negotiation of only 3% of concluded (new and renewed) individual employment contracts. See the Department of Labour 1997 Survey, at 27. 8 7 A market in which there exists an expanding wage differential between the primary and secondary labour markets. 8 8 Harbridge, supra note 7 at 49. 8 9 R. Harbridge, "Collective Employment Contracts: A Content Analysis", in New Zealand Experiences, 70 at 88. See also Rasmussen & Deeks, supra note 61 at 295; McAndrew, supra note 29 at 122; Whatman, supra note 85 at 71; Hector, supra note 78 at 340; R. Harbridge, & M. Street, "Labour Market Adjustment and Women in the Service Industry: A Survey" (1995) 20:1 N.Z.J.Ind.Rel. 23; S. Hammond & R. Harbridge, "The Impact of the ECA on Women at Work" (1993) 18:1 N.Z.Ind.Rel. 15. 19 K e n D o u g l a s concurs, having noted that the E C A has been: [ A ] key instrument i n widening inequality i n the distribution o f income, wealth, and p o w e r in N e w Zealand, both between classes and w i t h i n classes. 9 0 8. P a y cuts have meant that many in the poorest sector o f the w o r k force have incurred a substantial loss i n income compared to p r e - E C A levels, some suggest by as m u c h as twenty percent . 9 1 The effect o f these cuts has been exacerbated by their co inc iding w i t h high unemployment, reduced Government spending on social serv ices 9 2 and cuts to unemployment benefits. 9 3 A s K e l s e y argues, the burden o f free market labour relations has fallen most heavily on those w h o already had the least . 9 4 9. Consequently, increasing numbers o f N e w Zealanders are l iv ing i n poverty. A c c o r d i n g to D a n n i n , those i n poverty rose f r o m 360,000 i n 1990 to 510,000 in 9 0 K. Douglas, "Forming Productive Partnerships for Greater Prosperity, Productivity and Parity" (1997) Address to the 11th Annual Industrial Relations Conference, New Zealand Institute of International Research. 9 1 P. Walker, "What Happens When You Scrap the Welfare State" (1994) The Independent (N.Z.), 13 March, 17. 9 2 The ECA was introduced as part of expansive economic reforms. Other changes included no general increases in Guaranteed Retirement Income rates from April 1991; no increase in social security benefits from April 1991; abolition of universal family benefit payments; and the introduction of new stand down and work test provisions for those claiming the unemployment benefit. See Harbridge, supra note 7 at 31. Initiatives of this kind have continued in recent times. For example, those aged between 16 and 17 years of age are no longer eligible for the unemployment benefit (see "Cuts to Teen Benefits Now In Force" (1998) One Network News, 1 January (http://www.tvone.co.nz)). In addition, most benefits are now subject to strict service and work-testing requirements. See e.g., "Dole Suspension Threatened" (1998) The Press (N.Z.), 23 April; NZPA, "Dying Man Told to Attend Workshop or Lose Benefit" (1998) The Press (N.Z.), 26 May. 9 3 In April 1991, for example, the weekly unemployment benefit for a single person between the ages of 20 and 24 was cut by 25% from $143.57 to $108.17. See M. O'Brien, "New Wine in Old Bottles: Social Security in New Bottles" (1991) Reports and Proceedings, Social Policy Research Centre, Sydney, at 45. According to recent New Zealand Governments, these cuts serve to ensure that those on the unemployment benefit have sufficient "incentive" to find work. 9 4 Kelsey, New Zealand Experiment, at 271. 20 1 9 9 3 , 9 5 a level w h i c h has reportedly continued to rise. W h i l s t the val idity o f these reports obviously depends on h o w 'poverty ' is defined, this trend is nevertheless supported by the increasing demand for f o o d parcels in some sectors o f N e w Zealand society , 9 7 the rapid expansion o f the number o f annual bankruptcy petitions filed since 1991 , 9 8 and the fact that more employees than ever are w o r k i n g for free just to gain experience. 9 9 Dependency is becoming an increasing feature o f N e w Zealand society, a point noted by Kelsey: T h e vict ims o f reform were being forced into dependency o n the state. A t the same time, the state was shedding its responsibilities for their welfare. T h e r ig id ideology o f the reformers was brought face to face w i t h human despair as stories o f poverty, suffering and tragic anomalies appeared in the media almost every d a y . 1 0 0 10. Against this, many employees i n the primary labour market have secured significant pay increases since the enactment o f the E C A . F o r example, a study by Harbr idge conducted a year after the E C A was passed revealed that although 4 7 % o f the 110,000 w o r k e r s surveyed had received pay cuts or no increase in wages during the preceding 12 months, 19% had received increases o f 7% or m o r e . 1 0 1 W h i l s t there have been variations in theses figures subsequently, the basic trend o f Dannin, Working Free, at 171. 9 6 According to Kelsey, by the end of 1993 one in six New Zealanders was considered to be living in poverty. See Kelsey, New Zealand Experiment, at 10. See also "Anglicans on the March over Poverty" (1998) The Press (N.Z.), 14 May; "Welfare System Built on Flawed Premise" (1998) The Press (N.Z.), 15 May. 9 7 Wellington Downtown Ministry, Passing the Buck (Wellington, Wellington Downtown Ministry, 1994); Manukau City Council, Poverty and Hardship (Manukau, Manukau City Council, 1992); L. Morgan, "Beneficiaries 'Sacrificed' by Government" (1992) Evening Post (N.Z.), 6 May, 5; M. Munro, "Voting for the Lash in the New Zealand Laboratory" (1993) Sunday Star Times (N.Z.), 31 October; O. Riddell, "New Zealand Should Learn Lesson From Los Angeles Tumult" (1992) Press (N.Z.), 9 May. 9 8 Kelsey, Rolling Back the State, at 335. 9 9 The Minority Report, at 3 and 5. 1 0 0 Kelsey, Rolling Back the State, at 337. 1 0 1 See Harbridge, supra note 89 at 78. 21 separation between the primary and secondary labour markets c o n t i n u e s . 1 U Z E v e n former P r i m e M i n i s t e r J i m B o l g e r has acknowledged this disparity, noting that those employees w h o have received wage increases have been counterbalanced by those w h o have not, to such an extent that f r o m 1990 to 1995 the average real wage g r o w t h was just 0 . 1 % . 1 0 3 11. E m p l o y e r s have, in many cases, secured the removal o f penal rates and enhanced their contractual discretion to flexibly allocate w o r k . 1 0 4 F o r some, these developments occurred even before the E C A was passed, as a number o f unions engaged in concessionary bargaining in order to secure agreement before 15 M a y 1 9 9 1 . 1 0 5 T h e net result is that many employees are n o w w o r k i n g longer for less. 1 0 ' A c c o r d i n g to D a n n i n : T h e E C A made wage cutting an easy opt ion when employers faced financial difficulty or wanted higher profits. M o s t popular was el iminating premium or penal wages for overtime, weekends, or shift w o r k . W o r k e r s were also doing more unpaid w o r k , so they received less money for t ime w o r k e d . W o r k e r s were expected to w o r k harder or faster for no increase in pay and to cover for laid o f f employees or increased w o r k l o a d s that, in 1 0 2 Harbridge reports that the annual wage change in different industries ranged from 0.1% to 4.8% in 1994/1995, and from 2.8% to 7.6% in 1996/1997. See R. Harbridge et al, Employment Contracts: Bargaining Trends & Employment Law Update 1994/1995 (Wellington, Victoria University, 1995) at 12; R. Harbridge et al, Employment Contracts: Bargaining Trends & Employment Law Update 1996/1997 (Wellington, Victoria University, 1997) at 20. 1 0 3 E. Rasmussen, "Chronicle" (1996) 21 N.Z.J.Ind.Rel. 109 at 116. 1 0 4 Harbridge & Crawford, supra note 68 at 242; Hector, supra note 78 at 334; Pringle, supra note 69. 1 0 5 R. Macfie, "Unions Fold Under Pressure" (1991) National Business Review (N.Z.), 20 March, 2. 1 0 6 It is significant in this regard that the Minimum Wage Act 1983 provides in section 1 IB that the maximum number of hours to be worked per week by an employee is 40 unless the parties agree otherwise. In reality, many employees have no choice but to agree to work longer when requested to do so by their employers. For those on annual salaries, this extra work usually results in no extra pay. Moreover, many of those employees who are paid by the hour, are paid for overtime at their ordinary rate of pay. In contrast, the Employment Standards Act of British Columbia (R.S.B.C. 1996, c. 113) provides that an employer must pay overtime wages if it requires or allows an employee to work over 8 hours a day or 40 hours a week (s. 35). The rate of overtime pay is either 1.5 or 2 times the employee's ordinary rate, depending on the number of overtime hours worked. (See ss. 40 - 41). 22 the past, meant hiring a new worker . The average w o r k e r was experiencing an intensification o f w o r k . 1 0 7 12. T h e N Z B R T , N Z E F and numerous employers have repeatedly claimed that the E C A has resulted i n enhanced p r o d u c t i v i t y . 1 0 8 B y way o f example, R o g e r K e r r , E x e c u t i v e D i r e c t o r o f the N Z B R T , 1 0 9 advised an Austral ian conference in 1993 that the E C A had led to productivity increases o f 1 7 % . 1 1 0 T w o years later K e r r w r o t e that "remuneration has changed f rom pay for attendance to pay for achievement. T h e focus is on productivi ty and p r o f i t . " 1 1 1 Others are more sceptical, noting that many employers have simply cut wages rather than introducing i n n o v a t i o n ; 1 1 2 that most employment contracts do not l ink pay to p e r f o r m a n c e , 1 1 3 and that the assertions o f K e r r and others regarding enhanced product iv i ty frequently lack credible empirical support, and are, in many instances, fundamentally f l a w e d . 1 1 4 A c c o r d i n g to N e w Zealand economist, B r i a n E a s t o n : There appears to have been little economic benefit, i f any, f r o m the E C A , other than perhaps for employers at the expense o f workers . In particular, there is no evidence o f significant productivi ty gains ... , 1 1 5 Dannin, Working Free, at 173. (Footnotes omitted). 1 0 8 See e.g., W. Kasper, "Free To Work: The Liberalisation of New Zealand's Labour Market" (1996) 32 Policy Monograph 51 (Centre for Independent Studies, Sydney, 1996). 1 0 9 And an ex-employee of the New Zealand Treasury. 1 1 0 R. Kerr, "The Challenge for the 90's: Labour Reform in Australasia," (1993) Address to the Australasian Institute of Company Directors, 19 February, at 3. 1 1 1 R. Kerr, "Bargaining Under the Employment Contracts Act" [1995] N.Z.Emp.L.Bul. (N.Z.) 97. See also R. Kerr, "Employment, Productivity and Growth All Blossom Under the Employment Contracts Act" (1996) The Herald (N.Z.), 5 October. 1 1 2 K. Douglas, ""Organising Workers: The Effects of the Act on the Council of Trade Unions and its Membership", in New Zealand Experiences, 197 at 199; R. Ryan, "Flexibility in New Zealand Workplaces: A Study of Northern Employers" (1992) 17:2 N.Z.J.Ind.Rel. 129 at 145. 1 1 3 According to Harbridge, in 1994/1995, 84% of the 2688 contracts surveyed made no connection between pay and performance. See R. Harbridge et al, Employment Contracts: Bargaining Trends & Employment Law Update 1994/1995 (Wellington, Victoria University, 1995) at 17. 1 1 4 See e.g., Easton, supra note 61; Gilson & Wagar, supra note 80. 1 1 5 Easton, supra note 61 at 209. 23 13. Proponents o f the free market also c la im that the E C A has led to the creation o f numerous n e w j o b s and the reduction o f unemployment. H o w e v e r , as w i l l be discussed i n chapter four, there are deficiencies w i t h both assert ions . 1 1 6 14. In terms o f bargaining conduct, there is considerable empirical and anecdotal evidence that many employers are engaging in dictation rather than negotiation: . There is evidence that numerous employers are presenting contracts to their staff o n the basis o f "take it or leave i t " . 1 1 7 L e g a l challenges to this practice have been u n s u c c e s s f u l . 1 1 8 D i c t a t i o n has been particularly prevalent in negotiations for individual contracts and in negotiations for col lective contracts that have not involved u n i o n s . 1 1 9 . There is also evidence that contracts have been presented to employees for signature without any mention o f wage rates, suggesting that wages are, at least in some instances, being set unilaterally and without d i s c u s s i o n . 1 2 0 • S o m e employers have taken advantage o f the absence o f any obl igat ion to disclose information material to the negotiation or re-negotiation o f an employment contract. In one case, a Government department negotiated w i t h a w o r k e r a 3 % pay increase in exchange for a 5 0 % reduction in redundancy entitlements. The w o r k e r was made redundant t w o days later and received $20,000 less than he w o u l d have under his previous c o n t r a c t . 1 2 1 1 1 6 See infra notes 636-650. 1 1 7 The Minority Report, at 5; McAndrew, supra note 30 at 171; Harbridge, supra note 89 at 88; Dannin, Working Free, at 236-237. 1 1 8 See supra note 38. 1 1 9 McAndrew, supra note 29. 1 2 0 Harbridge, supra note 102 at 11; R. Harbridge & J. Lane, "The Effect of a Minimum Youth Wage in New Zealand" (1993) 18 N.Z.J.Ind.Rel. 275 at 278. 1 2 1 "Signed Up and Kicked Out" (1991) PSA Journal, July, at 3; Dannin, Working Free, at 278. 24 . E m p l o y e r s have been successful in unilaterally dictating the scope o f ^ negotiations. In one instance, the N e w Zealand Nurses A s s o c i a t i o n sought to raise w i t h an A r e a H e a l t h B o a r d issues o f training, w o r k p l a c e design and employer-employee communicat ion. T h e management negotiators rejected those topics outright, taking the intransigent stance that such issues fell outside the negotiations and w o u l d not be d i s c u s s e d . 1 2 2 . E m p l o y e r s are also aware that there is no legal requirement to ever conclude negotiations or to end a state o f lockout (unless their employees agree to the terms proffered). A s a result, some employers have effected lengthy lockouts and appointed ' temporary ' outside replacement workers in the i n t e r i m . 1 2 3 . V a r i o u s employers have util ised their power o f veto over bargaining to undermine unions and collective bargaining. F o r instance, in 1992 the Department o f Social Welfare refused to commence bargaining unti l the P u b l i c Service A s s o c i a t i o n (the " P S A " ) had provided it w i t h signed bargaining authorities f r o m each o f the Department 's employees w h o were represented by the union (6,259 in all). After receipt o f the authorities (procured by the union at considerable expense and effort) the Department still refused to b a r g a i n , 1 2 4 a stance w h i c h is lawful under the E C A . 1 2 5 15. Proponents o f the E C A have sought to dismiss reports o f this type o f conduct as " a n e c d o t a l " . 1 2 6 They further argue that to the extent such conduct does occur, it 1 2 2 S. Oxenbridge, "Health Sector Collective Bargaining and the Employment Contracts Act: A Case Study of Nurses" (1994) 19 N.Z.J.Ind.Rel. 17 at 26. 1 2 3 See e.g., "New Zealand's Longest Lockout Sinks into Statistical Black Hole" (1992) National Business Review (N.Z.), 23 October. 1 2 4 "Bureaucratic DSW Tactic Backfires" (1992) Pub.Service.J. June. 1 2 5 Most, if not all, of the conduct noted would, if it arose in British Columbia, constitute evidence of a failure to bargain in good faith. See infra notes 210-235. 1 2 6 See the advice of the Public Sector, infra notes 186-187; Kerr, supra note 66 at 102. 25 arises only in the minority o f cases , 1 2 7 and w o u l d have occurred whether or not the E C A had been e n a c t e d . 1 2 8 Against this, critics o f the E C A cite empirical studies indicating that dictation is n o w occurr ing i n the formation o f most employment c o n t r a c t s , 1 2 9 and further, that this dictation is significantly more l ikely to occur n o w that unions have been eliminated f rom the majority o f labour n e g o t i a t i o n s . 1 3 0 16. Conf l ic t has also continued to arise in N e w Zealand w o r k places. Immediately f o l l o w i n g the passage o f the E C A there was a reduction in strikes and l o c k o u t s . 1 3 1 H o w e v e r , between 1993 and 1996, strikes and lockouts occurred more frequently, w i t h the associated number o f days lost increasing every y e a r . 1 3 2 Since 1996, the number o f reported strikes and lockouts appears to have d e c l i n e d , 1 3 3 although various queries have been raised as to the accuracy o f these f i g u r e s . 1 3 4 T h e existence o f continuing workplace conflict is also evidenced by increases in 1 2 7 A. Knowles, "The Employment Contracts Act 1991: An Employer's History" (1997) 28 Cal.West.Int.L.J. 75 at 86; P. Boxall, "Management Strategy and the Employment Contracts Act 1991", in New Zealand Experiences, 148 at 160. 1 2 8 Carroll & Tremewan, supra note 6 at 195. 1 2 9 See infra notes 558-568. 1 3 0 Harbridge, supra note 89 at 88; McAndrew, supra note 30 at 181. 1 3 1 Proponents of the ECA hailed this as evidence of reduced workplace conflict. See e.g., the references in Dannin, Working Free, at 304. In contrast, critics of the ECA argue that this initial decline was due to the severity of the economic depression that existed in the early 1990s, and to union disorganisation. See J. Henning, "The Employment Contracts Act and Work Stoppages" (1995) 20:1 N.Z.J.Ind.Rel. 77; Douglas, supra note 112 at 199; Harbridge & Crawford, supra note 68 at 244. 1 3 2 In 1993 over 23,000 workdays were lost to strikes and lockouts. By 1996, this figure had increased to 72,900. See the New Zealand Official 1997 Yearbook, 100th ed., (Wellington, Department of Statistics, 1997) at 363-364. 1 3 3 J. Kirk, "Work Stoppages Down" (1998) The Evening Post (N.Z.), 26 June, 13. 1 3 4 There are a number of limitations in the accuracy of the strike and lockout statistics reported by the Department of Statistics. Significantly, there is no legal compulsion on employers, employees and unions to report strikes and lockouts. Moreover, in order to be included in the Department's findings, a strike or lockout must involve at least one days action by 10 employees. And thirdly, the data omits various manifestations of conflict, such as the issuing of stopwork notices, worker marches, lunchtime meetings and the like. See Kirk, ibid. 26 employment related l i t i g a t i o n , 1 3 5 employee dissat is fact ion, 1 3 6 and w o r k p l a c e 137 turnover. 1.4 The Winds of Change T h e domestic cr i t ic ism o f bargaining under the E C A has been persistent and widespread. T h e E C A has been variously described as " a direct repudiation o f those labour laws w h i c h support col lective action and b a r g a i n i n g " , 1 3 8 as legislation w h i c h enacts " industrial w a r f a r e " , 1 3 9 and as the "most hostile anti-union legislation i n the O E C D . " 1 4 0 It has also been said that col lective bargaining i n N e w Zealand is n o w the "anti-thesis" o f b a r g a i n i n g ; 1 4 1 that the process o f bargaining has c o l l a p s e d ; 1 4 2 and that the majority o f employees feel compel led to accept the terms offered to them by e m p l o y e r s . 1 4 3 Indeed a judge o f the N e w Zealand E m p l o y m e n t C o u r t recently stated that the "negotiat ions" 1 3 5 The number of claims filed in the Employment Tribunal and Employment Court have risen significantly over the last six years. For example, in its first year of operation (1991/1992) the Employment Tribunal received 2,332 applications for hearings (an average of 194 per month). This figure has increased in every subsequent year, to the extent that 5,144 claims were received in the year to June 1996 (an average of 428 per month, and an increase of 220% in just four years). See New Zealand Department of Labour, Annual Report for the Year Ended June 30, 1996. According to proponents of the ECA, this increase in litigation is due to the ECA expanding the personal grievance jurisdiction to all employees (whereas the LRA limited personal grievances to those covered by collective agreements and awards). However, while this expansion may serve to explain an initial increase in the claims filed, it fails to address the continuing increase that has occurred over a number of years, and the extent of that increase. 1 3 6 Whatman, supra note 85 at 66-68. 1 3 7 See e.g., E. Rasmussen, "Chronical" (1997) 22:1 N.Z.J.Ind.Rel. I l l at 111-118. Interestingly, the Department of Labour 1997 Survey reported a 31% level of employee turnover for the year to July 1996 (see Department of Labour 1997 Survey, at 57). 1 3 8 Dannin, Working Free, at 3. 1 3 9 Kelsey, Rolling Back the State, at 207. 1 4 0 R. Webster, "Operating under the Act: One Union's Experience", in New Zealand Experiences, 237 at 238. 1 4 1 G. Anderson, "Collective Bargaining and the Law: New Zealand's Employment Contracts Act Five Years On" (1996) 9 A.J.L.L. 103 at 132. 1 4 2 Dannin, supra note 33 at 490. 1 4 3 McAndrew & Ballard, supra note 29. 27 w h i c h take place under the E C A bear no resemblance to the actions normally associated w i t h that t e r m . 1 4 4 In his v iew, negotiations under the E C A can be no more than: [ A ] presentation by one intended party to the contractual relationship o f a f o r m o f contract to the other and the former 's refusal to deviate f r o m its o f f e r . 1 4 5 In 1993 the N e w Zealand Parliament commissioned a select committee to investigate the impact o f the E C A o n the N e w Zealand labour market. F o r reasons best k n o w n to the polit icians involved, t w o reports were produced. One by the committee members w h o were O p p o s i t i o n M e m b e r s o f Parliament (the Minority Report)1*6 and the other by those w h o were Government M e m b e r s o f P a r l i a m e n t . 1 4 7 A c c o r d i n g to the, Majority Report: A m u c h repeated statement by employees was that the A c t has given too m u c h p o w e r to employers. Employees feel powerless to negotiate suitable condit ions i f employers refused to take account o f their wishes. ... [A] factor much commented u p o n is the lack o f a g o o d faith bargaining provis ion i n the A c t . This related to the feelings o f powerlessness w h i c h employees feel, to in some w a y ensure an employer enters into meaningful negot iat ions . 1 4 8 T h e Majority Report also noted that the E C A : [CJontains no prov is ion to ensure an employer actually bargains w i t h employees. U n i o n s t o l d the committee that in many cases, employers either made a t o k e n attempt to negotiate, without taking on board agent's concerns, and then offer a contract for signing; or do not negotiate at all and offer a contract on a 'take it or leave i t ' basis. U n i o n s said the effect o f a lack o f a g o o d faith bargaining requirement is that employees are denied the opportunity to have a say in their condit ions o f e m p l o y m e n t . 1 4 9 144 Northern Distribution Union, Inc\. 3 Guys Limited, [1992] 3 ERNZ 903. 145 Ibid, at 915. See also Hawtin, infra notes 389-390. 146 Supra note 58. 147 Report of the Labour Committee on the Inquiry into the Effects of the Employment Contracts Act 1991 on the New Zealand Labour Market (Wellington, 1993) [hereinafter the "Majority Report"]. 148 The Majority Report, at 16. 1 4 9 The Majority Report, at 38. 28 Y e t despite acknowledging these concerns, the Majority Report failed to recommend the introduct ion into the E C A o f a duty to bargain i n g o o d faith, stating at 39: T h e committee listened to the arguments w i t h interest, but felt the evidence presented in favour o f a g o o d faith bargaining provis ion was inconclusive. There w o u l d be substantial difficulty in defining what " g o o d faith" means in an industrial context without leading to considerable regulation o f the various parties' f reedom to reach agreement relevant to particular workplaces. T h e committee has no recommendation to make o n this m a t t e r . 1 5 0 V a r i o u s commentators have subsequently called for the introduct ion o f a duty to bargain in g o o d faith. A n d e r s o n has argued that such a duty w o u l d enhance the prospects o f meaningful n e g o t i a t i o n . 1 5 1 D a n n i n takes a similar v iew, arguing that any system o f labour relations that fails to require g o o d faith participation w i l l struggle to deliver genuine b a r g a i n i n g . 1 5 2 A n d according to Webster: Introducing [the E C A ] i n a time o f economic recession without even the barest acknowledgement o f bargaining in g o o d faith (included even in U n i t e d States labour law) has completely slanted the balance o f power against w o r k e r s and u n i o n s . 1 5 3 International cr i t ic ism has also been levelled at the bargaining regime instituted by the E C A . 1 5 4 In February 1993 the N e w Zealand C o u n c i l o f Trade U n i o n s filed a complaint about the E C A w i t h the International L a b o u r O r g a n i s a t i o n . 1 5 5 T h e C o u n c i l o f Trade The Majority Report, at 39. Cf., the Minority Report, which recommended the complete repeal of the ECA. See the Minority Report, at 24. 1 5 1 Anderson, supra note 141 at 127. See also, M. Wilson, "Contractualism and the Employment Contracts Act 1991: Can They Deliver Equality For Woman" (1994) 19:3 N.Z.J.Ind.Rel. 256, at 271. 1 5 2 Dannin, "We Can't Overcome", at 154. See also R. Macfie, "Employers Use of Lockouts Under the Employment Contracts Act 1991: A New Balance of Power" (1992) 17:3 N.Z.Ind.Rel. 319. 1 5 3 Webster, supra note 140 at 238. 1 3 4 Although, as noted, some jurisdictions have viewed the ECA as a model worthy of duplication. See supra notes 52-53. 1 5 5 Case No. 1698: "Complaint Against the Government of New Zealand Presented by the New Zealand Council of Trade Unions (NZCTU)", In Reports of the Committee on the Freedom of Association (292nd Report), ILO Official Bulletin, Vol. 77:1, Series B (1994) 208. 29 U n i o n s alleged that the E C A contravened I L O Conventions 8 7 1 5 6 and 9 8 . 1 5 7 This led to an investigation by the I L O ' s F r e e d o m o f Assoc ia t ion Committee, w h i c h lasted almost t w o years. T h e C o m m i t t e e ' s interim report was adopted by the G o v e r n i n g B o d y i n M a r c h 1 9 9 4 , 1 5 8 and was damming o f the E C A . One o f the report 's many crit icisms was that the E C A failed to support collective b a r g a i n i n g . 1 5 9 After further information gathering by a direct contacts mission, and a number o f subsequent cases in the E m p l o y m e n t C o u r t and C o u r t o f A p p e a l , the I L O C o m m i t t e e issued its F i n a l D e c i s i o n , w h i c h was adopted in N o v e m b e r 1 9 9 4 . 1 6 0 T h e F i n a l D e c i s i o n , whilst less crit ical than the interim r e p o r t , 1 6 1 reiterated the Commit tee ' s concern that the E C A did not incorporate a duty to bargain in g o o d faith. O n this point the Commit tee stated: W h i l e recognising that the question as to whether one party adopts an amenable or u n c o m p r o m i s i n g attitude towards the demands o f the other is a matter for negotiation between the parties wi th in the law o f the land, the Commit tee stressed the importance w h i c h it attaches to the principle that both employers and trade unions should bargain in g o o d faith and make every reasonable effort to come to an agreement and that satisfactory labour relations depend primari ly o n the parties' attitudes towards each other and on their mutual c o n f i d e n c e . 1 6 2 156 ILO Convention 87 Concerning the Freedom of Association and Protection of the Right to Organise. 157 ILO Convention 98 Concerning the Application of the Principles of the Right to Organise and to Bargain Collectively. Although New Zealand has not ratified Conventions 87 and 98, the jurisdiction of the ILO to investigate this complaint stemmed from New Zealand's membership of the ILO. See the International Labour Organisation, Digest of Decisions and Principles of the Freedom of Association Committee; cited inMazengarbs, at A/203. 158 Supra note 155. 159 Supra note 155 at 235-238. 1 6 0 Case No. 1698: "Complaint Against the Government of New Zealand Presented by the New Zealand Council of Trade Unions (NZCTU)", In Reports of the Committee on the Freedom of Association (295th Report), ILO Official Bulletin, Vol. 77:3, Series B (1994) 39. 1 6 1 For a description of the changes in the Committee's views see Anderson, supra note 141 at 105-108. 162 Supra note 160 at 80. 30 T h e Government o f the day, the N Z E F and the N Z B R T all sought to marginalise the I L O ' s findings. T h e M i n i s t e r o f L a b o u r at the time, D o u g K i d d , asserted that the I L O ' s crit icisms "direct ly challenge the democratic and parliamentary process o f member states" and that the " I L O risks being portrayed as a partisan advocate in domestic p o l i c i e s . " 1 6 3 Similarly , Steve M a r s h a l l , the chief executive o f the N Z E F claimed: T h e I L O , in its 75th year struggling to retain its former relevance has, in cri t ic is ing the E C A , found a method o f reasserting i t se l f . 1 6 4 H o w e v e r , the opposi t ion pol i t ical parties in N e w Zealand appeared to take note o f what the I L O had said. In 1995 N e w Zealand voted by w a y o f referendum to adopt a M i x e d M e m b e r P r o p o r t i o n a l ( " M M P " ) electoral system o f G o v e r n m e n t . 1 6 5 In the lead up to the first M M P election, a number o f pol i t ical parties responded to the international and domestic cr i t ic ism o f the E C A by pledging to modify the A c t to include, amongst other things, a duty to bargain in g o o d f a i t h . 1 6 6 O n e o f the most vociferous advocates o f this proposal was the N e w Zealand First Party. A c c o r d i n g to its Industrial Relat ions P o l i c y R e l e a s e , 1 6 7 the party promised to amend the E C A to require all employers and employees to bargain i n g o o d faith. This pledge was reiterated in various media statements issued by b o t h the leader and deputy leader o f the party, in w h i c h they crit icised the E C A for creating a significant imbalance o f bargaining power i n favour o f most e m p l o y e r s . 1 6 8 A s a result o f the election on 12 October 1996, a C o a l i t i o n Government was formed by the N a t i o n a l Party (the previous Government) and the N e w Zealand First Party. M a n y in 1 6 3 D. Kidd, Speech to the Plenary Session of the ILO (1994) 8 June, at 2. 1 6 4 National Business Review (1994) 22 July. 1 6 5 Up until that time the New Zealand Government had been elected on a "first past the post" system. 1 6 6 See e.g., "Alliance Would Take the Free out of Free Enterprise" (1996) The Independent (N.Z.), 4 October, 26, which details the pledges of the New Zealand First, Alliance and Labour parties to enact legislation requiring good faith bargaining. See also P. Kiely, "Employment Law Under MMP" (1996) Proceedings of the New Zealand Law Society Employment Law Conference, 215. 1 6 7 New Zealand First Policy Release, Industrial Relations 2 (1996) 26 September. 1 6 8 See J. Hughes, "The Employment Court, 'Judicial Activism,' and the Coalition Agreement"'(1997) 28 Cal.West.Int.LJ. 167 at 169. 31 organised labour v iewed this result w i t h at least a degree o f opt imism, and l o o k e d ahead to the introduct ion o f a duty to bargain in g o o d faith. Since the election, however, little has happened to justify that optimism. It w o u l d appear that in the course o f negotiating the terms o f the coal i t ion, (negotiations w h i c h occurred after the election), N e w Zealand First may w e l l have chosen to renege o n its earlier pledge. T h e Coalition Agreement,169 w h i c h records the terms o f agreement reached between N a t i o n a l and N e w Zealand First , contains a section entitled Policy Area: Industrial Relations. A c c o r d i n g to the eighth Key Initiative of Policy detailed i n that section, the C o a l i t i o n Government promised to: Introduce the concept o f " fa ir" bargaining into the E m p l o y m e n t Contracts A c t , by describing areas where compliance is necessary to abide by the principles underly ing the A c t (e.g. the obl igation to respect the choice o f the bargaining agent and not to undermine the bargaining process by bypassing the a g e n t ) . 1 7 0 A l t h o u g h it is by no means clear, this statement o f intent could be read as a substantial repudiation o f N e w Zealand Firs t ' s pledge to introduce into the E C A a duty to bargain in " g o o d faith". A c c o r d i n g to Hughes: [Cjontrary to the promise in N e w Zealand Firs t ' s policy, apparently the E C A w i l l not be substantively amended to introduce any form o f g o o d faith bargaining properly so called. Instead, "fair bargaining" w i l l be represented by statutory amendment to incorporate the existing interpretation given to the relevant provis ions o f the E C A . (This w i l l result, o f course, in no change to the legal principles applicable pr ior to the general election, w h i c h N e w Zealand First has crit ic ised as being unfairly biased i n the employer 's f a v o u r ) . 1 7 1 S u c h a v i e w is supported by statements subsequently released by Government Officials. A c c o r d i n g to M a x B r a d f o r d (the current M i n i s t e r o f L a b o u r ) the Coalition Agreement: (Wellington, The New Zealand Government, December 1996). 170 Ibid, at 41. 1 7 1 Hughes, supra note 168 at 171. 32 [P]roposes to introduce fair bargaining to promote compliance w i t h the underly ing principles o f the A c t . This includes describing the obligations to respect the choice o f bargaining agent and not undermine the bargaining process by bypassing the agent, w h i c h have been underlined by various court decisions since the E m p l o y m e n t Contracts A c t was passed. F a i r bargaining w i l l reflect the N e w Zealand experience and is not to be modelled on United States or Canadian concepts of Good Faith Bargaining 1 7 2 B i l l B i r c h , the current M i n i s t e r o f Finance, has echoed these sentiments: T h e C o a l i t i o n Agreement states that the Government w i l l introduce the concept o f " fa i r" bargaining to more clearly outline the responsibilities o f parties under the E C A . This may include clarifying the obligations to recognise and not to bypass an authorised agent. The basic principles o f the E C A w i l l remain ... I want to emphasise that this is not " g o o d faith bargaining," N o r t h A m e r i c a n style. W e remain committed to a permissive f ramework for industrial relations, the opposite o f the N o r t h A m e r i c a n system, w h i c h prescribes w h e n people must meet to bargain and what they have to bargain, and a host o f other controls o n bargaining 173 behaviour. T h e last six years have taught us that such control is not necessary. Y e t , even these statements n o w appear to have been reneged upon. O n 23 July the C o a l i t i o n Government released its long awaited "Industrial Relations P a c k a g e " . 1 7 4 W h i l s t this package referred to a number o f changes w h i c h w i l l be introduced to the personal grievance and remedial sections o f the E C A , no mention was made o f introducing a duty o f " fa i r" bargaining. O n the contrary, M a x B r a d f o r d stated in his supporting release that: T h e Government has also carefully considered the C o a l i t i o n Agreement key initiative w i t h respect to introducing the concept o f " fa ir" bargaining into the E m p l o y m e n t Contracts A c t . Af ter carefully examining the case law, the C o a l i t i o n 1 7 2 M. Bradford, "What Happens Now?" (1997) Address to the Industrial Relations Conference, Rotorua, 3 March, at 4. [Emphasis added]. See also, E. Edlin, "Bradford Puts Employment Issues Under Microscope" (1997) The Independent (N.Z.), 7 March, 2. 1 7 3 Address by the Minister of Finance, Bill Birch, to the Wellington District Law Society (1997) 7 June. [Emphasis added]. 174 Industrial Relations Package, (Wellington, Coalition Government, 27 July, 1998). 33 Government concluded the case l a w supports fairness i n bargaining, given the interests o f both parties to an employment c o n t r a c t . 1 7 5 Subsequent to M a x B r a d f o r d issuing this statement, the C o a l i t i o n Government has dissolved, w i t h the N a t i o n a l Party n o w functioning as a minority Government, at least for the t ime b e i n g . 1 7 6 This , combined w i t h B r a d f o r d ' s statement, may w e l l have signalled the death o f what had already become a remote prospect at b e s t . 1 7 7 W h a t is most remarkable about this " b a c k - d o w n " is that it occurred without any substantive and informed debate. T h e Government has stated that the current l a w is sufficient; that it supports fairness; but provides no justif ication or reasoning for that conclusion. B r a d f o r d asserts the Government has "consulted w i d e l y " , 1 7 8 but fails to specify w i t h w h o m , and what was said. In effect, the N e w Zealand public is asked simply to trust the Government ' s judgement. D e t e r m i n i n g w h y " g o o d fai th" bargaining was watered d o w n to "fair bargaining" and then abandoned altogether is difficult, primarily because both N a t i o n a l and N e w Zealand First agreed to keep their coal i t ion negotiations c o n f i d e n t i a l . 1 7 9 H o w e v e r , it is possible to glean at least a partial explanation f rom a document w h i c h has subsequently been made public. In the course o f the coal i t ion negotiations, the various pol i t ical parties involved sought particular information f r o m various Government departments and agencies . 1 8 0 T h e 1 7 5 M Bradford, "Industrial Relations Package - Good For New Zealand" (1998) Executive Government News Release, 27 July, 2. 1 7 6 See e.g., H. Bain, "Peters Walks Out. Shipley Now Running a Minority Government" (1998) The Dominion (N.Z.), 13 August, 1. 1 7 7 Primarily because the calls for the introduction of bargaining controls into the ECA emanated from the New Zealand First Party and not the National Party (who introduced the ECA in the first place). Indeed, it now appears the Minority National Government may be reconsidering all policy initiatives introduced by New Zealand First. See N. Venter, "All Coalition Legislation Under Review" (1998) The Dominion (N.Z.), 26 August, 2; "Nats aim to axe NZ First Policies" (1998) The Waikato Times (N.Z.), 26 August, 1. 178 Supra note 175. 1 7 9 Hughes, supra note 168 at 170. 1 8 0 Including the Department of Labour. For the sake of simplicity, these departments and agencies will be referred to herein as the "Public Service". 34 questions asked, and the answers given, have been recorded in a document entitled Information Supplied by the Public Service in Response to Requests made by Political Parties Taking Part in Coalition Formation Talks.lu Request 501 included the fo l lowing: W h a t are the implications o f amending the E m p l o y m e n t Contracts A c t to: 1. E n s u r e a neutral bargaining environment between employer and employee by extending g o o d faith provisions to all employers and employees (i.e., to apply to all contracts, collective and individual , and all bargaining agents) . 1 8 2 T h e response o f the P u b l i c Service was far f rom enthusiastic, and included the f o l l o w i n g statements: 1 8 3 "regulations are not always successful in affecting people 's behaviour. Rather they may encourage game playing around the rules rather than the development o f the employment relationship." " g o o d faith bargaining provisions increase the l ike l ihood o f third party interventions in the bargaining process. This may reduce the degree to w h i c h agreements reached reflect the needs o f local situations." "greater perscriptiveness over bargaining arrangements risks reducing flexibility and adaptability to changing circumstance." "greater prescription over the process is also l ikely to increase the costs associated w i t h bargaining and the degree o f l i t igation i n v o l v e d . " "experience overseas has suggested that once g o o d faith bargaining provis ions are established there is potential for their coverage to extend over time, partly through judic ia l decision m a k i n g . " N o t one o f these statements was supported by specific research or data. T h e P u b l i c Service then went o n to suggest that g o o d faith bargaining is already promoted by the existing l a w in N e w Zealand: (Wellington, State Services Commission, February 1997). 1 8 2 Ibid, at 217. The document released to the author is not paginated, hence all page references have be calculated by the author. 183 Ibid, at 219. 35 There is a range o f provisions in the E m p l o y m e n t Contracts A c t w h i c h set some limits o n bargaining behaviour, and w h i c h may contribute to the establishment o f g o o d faith b a r g a i n i n g . 1 8 4 Perhaps most significant, however, was the Services' wil l ingness to treat concerns regarding exploitat ion and bad faith conduct under the E C A as "anecdotal" , but the alleged costs o f introducing a duty to bargain in g o o d faith as " f a c t " . 1 8 5 This inconsistency is i l lustrated by the f o l l o w i n g four excerpts: Anecdotally, there is a perception that employers use the opt ion o f not negotiating to resist claims considered legitimate by employees, particularly i n the context o f individual negotiations. N e w contracts at the point o f hire may also be offered o n a "take it or leave i t " basis, without negotiation. In the absence o f reliable data the extent o f this perception cannot be accurately assessed. In addit ion, it is not clear whether or not this approach can be attributed to a lack o f g o o d faith bargaining • • 186 provisions. There is also a perception that employers may refuse to re-negotiate contracts after they expire. In practice there are a w i d e range o f reasons w h y contracts may not be immediately re-negotiated and employees are always covered by an employment contract. ... The voluntary nature o f the bargaining f ramework al lows a range o f bargaining behaviours, and a range o f outcomes. It is a matter o f perception as to the extent to w h i c h these behaviours and outcomes constitute a " p r o b l e m " . 1 8 7 T h e E m p l o y m e n t Contracts A c t liberalised bargaining processes and options and has contributed to adjustment processes over a period o f sustained economic g r o w t h and employment growth. A m e n d i n g the E m p l o y m e n t Contracts A c t to reintroduce procedures incurring significant transaction costs or constraining outcomes should only be considered i f the identifiable benefits f r o m doing so are sufficient to offset these c o s t s . 1 8 8 Ibid, at 221. Hughes, supra note 168 at 174. Ibid, at 132. [Emphasis added]. Ibid. [Emphasis added]. Ibid, at 465. [Emphasis added]. 36 T h e uncertainty that results f rom increased l it igation, the undermining o f the finality o f concluded contracts; and the need for the courts over t ime, to develop a consistent approach out o f wide ly divergent ad hoc situations w o u l d be l ike ly to have a significant impact o n the efficient functioning o f the labour market, w i t h f l o w - o n effects to l o w e r e m p l o y m e n t . 1 8 9 N o t only do these comments represent an unbalanced approach to the issue o f g o o d faith bargaining, as H u g h e s argues, they also represent the P u b l i c Service seeking simply to reinforce existing Government p o l i c y . 1 9 0 In the end result, a significant component o f N e w Zealand F irs t ' s manifesto appears to have been cast aside on the basis o f conjecture and unsubstantiated rhetoric. 1.5 The "Here and N o w " T h e foregoing serves to contextualise the N e w Zealand debate o n introducing a duty to bargain in g o o d faith into the E C A . A s is apparent, the call for this duty arose i n response to the changes implemented in N e w Zealand employment and labour relations by the E C A . T h e dramatic swing f r o m state facilitated collective bargaining to free market employment and labour relations has left many questioning whether the current legislation has gone too far. Y e t , recent statements made by the N e w Zealand Government suggest that earlier pledges for reform are n o w in jeopardy. These statements highlight the need for timely and informed debate o n the need for a duty o f this nature, and the possible consequences o f its introduction. Y e t , i f such debate is to move beyond the conjecture w h i c h arguably pervades many o f the N e w Zealand Government ' s recent statements on this issue, a substantive frame o f reference is required. In other words , without an example to w o r k f rom, this debate w i l l struggle to m o v e beyond the abstract. The example to be used i n this thesis in that w h i c h applies in B r i t i s h C o l u m b i a , Canada. B r i t i s h C o l u m b i a , has been selected for a number o f Ibid, at 466. [Emphasis added]. Hughes, supra note 168 at 174. 37 reasons. In the first place, although various labour relations jurisdict ions invoke a duty o f this n a t u r e , 1 9 1 many o f the fundamental issues that arise in respect o f the duty do so in each jur isdict ion. Consider ing a number o f jurisdict ions w o u l d , then, be o f l imited value. Secondly, the selection o f one jur isdict ion is appropriate given that the purpose o f this thesis is to consider one possible approach to the issue, rather than advocating one single approach as best suiting N e w Zealand. Such an assertion w o u l d be premature without there first having been debate o n various options. Third ly , i n terms o f selecting a particular jurisdict ion, Canada, l ike N e w Zealand, is a member o f the commonweal th w i t h a legal system that is, for the most part, derived f r o m B r i t i s h c o m m o n l a w . 1 9 2 C o m m o n a l i t y such as this enhances the relevance o f the Canadian approach. M o r e o v e r , the duty to bargain in g o o d faith has been operative in C a n a d a for over fifty years, and, as such, a considerable and valuable body o f jurisprudence has developed o n the issue. A n d finally, the focus has been narrowed further to B r i t i s h C o l u m b i a , because the manner in w h i c h the duty to bargain in g o o d faith is applied in this province is largely indicative o f the posit ion taken throughout Canada. Indeed, a review o f labour l a w texts in Canada reveals the law o n g o o d faith bargaining to be remarkably homogeneous throughout the various Canadian jurisdictions, w i t h labour boards routinely referring to and adopting cases decided in other p r o v i n c e s . 1 9 3 B e f o r e consideration is g iven to the approach taken in B r i t i s h C o l u m b i a , it is important to note the l imitations o f such an assessment. It is readily conceded that what may w o r k in one jur isd ic t ion may not necessarily succeed in another. A s one commentator has noted, 1 9 1 Including the United States of America, Australia and Japan. See W. Hodge, "Employment Law" [1995] N.Z.L.Rev. 107 at 123. 1 9 2 The civil law system in Quebec aside. 1 9 3 See e.g., G. Adams, Canadian Labour Law, 2d ed. (Canada, Law Book Company, 1997) at para. 1.230 [hereinafter "G. Adams"]; D. Corry, Collective Bargaining and Agreement. Negotiation, Strategy and the Law (Ontario, Canada Law Book Company, 1997) [hereinafter "Corry"] at 8.1 - 8.4. Accordingly, while reference will be made primarily to British Columbia legislation and case law, decisions of general application issued by labour boards in other Canadian provinces will also be referred to where appropriate. 38 compar ing different labour laws poses "nearly insurmountable problems because it ultimately reaches into a comparison o f social structures and a t t i t u d e s . " 1 9 4 H o w e v e r , although these difficulties cannot be ignored, as w i l l be discussed i n chapter five, idiosyncrasies o f a particular jur isdict ion can be accommodated for in an appropriate statutory amendment. M o r e o v e r , there is m u c h to be commended i n countries seeking to learn f r o m the experiences o f others, particularly when their o w n experience is l imited or non-existent. That is precisely the case at hand, for N e w Zealand has never previously enacted a statutory duty to bargain in g o o d faith in labour r e l a t i o n s . 1 9 5 A domestic comparison is, then, impossible, and it is suggested that drawing o n a concrete example, albeit one f r o m a foreign jur isdict ion, is a considerable improvement on i n v o k i n g conjecture and rhetoric. 1 9 4 C. Summers, "Comparison in Labor Law" (1985) 7 Indus.Rel.L.J. 2. See also H. Collins, "Methods and Aims of Comparative Contract Law" (1991) 11:3 Ox.J.L.S. 396. 1 9 5 In 1995 the Alliance Party sought to introduce into Parliament the Employment Contracts (Employment Rights) Bill, which made mention of the concept of good faith bargaining, but the Bill was defeated at its first reading. See Hansard, Parliamentary Debates of New Zealand (1995) 22 March, 6345-6365. See infra notes 777-778, for a discussion of the one other previous instance where a duty of this nature was drafted into statute, but was not enacted (due to a change in Government). 39 CHAPTER 2: BRITISH COLUMBIA LABOUR RELATIONS AND THE DUTY TO BARGAIN IN GOOD FAITH 2.1 The Duty Defined In Canada a union certified in respect o f a bargaining unit and the employer o f that unit are obl iged by statute to bargain i n g o o d f a i t h . 1 9 6 This statutory duty was introduced into Canada by federal W a r t i m e L a b o u r Regulations. These regulations were enacted in 1 9 4 4 , 1 9 7 and were based o n the A m e r i c a n W a g n e r A c t o f 1935. T h e duty was subsequently incorporated into federal l a w i n 1948 and provincia l l a w shortly thereafter . 1 9 8 The duty is presently embodied i n the Canada L a b o u r C o d e 1 9 9 and i n various provincia l statutes inc luding the B r i t i s h C o l u m b i a L a b o u r Relations C o d e (the " B C C o d e " ) . 2 0 0 W h i l e there are minor differences i n the w o r d i n g used i n some o f these statutes, the general approach is illustrated by section 11(1) o f the B C C o d e : A trade u n i o n or employer must not fail or refuse to bargain col lectively in g o o d faith in B r i t i s h C o l u m b i a and to make every reasonable effort to conclude a collective agreement. 2 0 1 1 9 6 This statutory duty is confined to collective bargaining. There is presently no equivalent duty in Canada in respect of the negotiation of individual employment contracts (contracts of service). The extent to which the Canadian common law has recognised a duty of good faith in employment dismissals and in the negotiation of non-employment relationships will be discussed in chapters three and four, respectively. 1 9 7 PC 1003, 1944, s. 10(2). 1 9 8 A. Forrest, "Labour Legacy in Question; Canada Post-War Labor Law PC 1003" (1995) 29:1 Canada Dimension 29. 1 9 9 R.S.C. 1985, c. L-2, s. 50. 2 0 0 R.S.B.C. 1996, c. 244, ss. 11 and 47. See also Alta., Labour Relations Code, S.A. 1988, c. L-1.2, s.58; Man., Labour Relations Act, R.S.M. 1987, c. L 10, ss. 62 and 63(1); Ont., Labour Relations Act, R.S.O. 1995, c. L.2., s. 17; N.B., Industrial Relations Act, R.S.N.B. 1973, c. 1-4, s. 34; N.S., Trade Union Act, R.S.N.S. 1989, c.475, s. 35(a); P.E.I., Labour Act, R.S.P.E.I. 1988, c. L - l , s. 22(a); Que., Labour Code, R.S.Q. 1977, c. C-27, s. 53; Nfld., Labour Relations Act, R.S.N. 1990, c. L - l , s. 71. 2 0 1 See also section 47. The requirements of "good faith and reasonable efforts" are also found in the Canada Labour Code and in the statutes of Alberta, Manitoba and Ontario. The New Brunswick, Nova Scotia and Prince Edward Island statutes all refer to a standard of "reasonable efforts", whilst the Quebec Code requires negotiations to be carried out "diligently and in good faith". Newfoundland's statute refers 40 O n c e triggered by the issuing o f a notice to bargain (or the actual commencement o f bargaining, whichever occurs first), the duty subsists unti l the final resolut ion o f an agreement . 2 0 2 T h e duty continues, for example, notwithstanding the appointment o f a mediator or the commencement o f arbitration or a strike or l o c k o u t . 2 0 3 T h e term " g o o d fai th" is not defined in the B C C o d e . 2 0 4 It has, then, been left to the B r i t i s h C o l u m b i a L a b o u r Relations B o a r d (the " B C B o a r d " ) and, to a lesser degree, appeal courts, to determine the scope o f the duty on a case by case b a s i s . 2 0 5 W h i l s t incapable o f one single definition, the duty to bargain in g o o d faith can be v i e w e d as a set o f procedural requirements developed by tribunals and courts over time. These requirements are aimed at bringing the parties to the bargaining table to: [0]utl ine their issues, present their proposals, articulate the underlying rationale [for those proposals] and make every reasonable effort to reach c o m m o n ground in order to enter into a collective agreement. 2 0 6 In addit ion to mandating certain procedural requirements, the duty is also aimed at eliminating bad faith conduct. A s the B C B o a r d has stated: only to good faith, while the Saskatchewan legislation requires the parties to meet and bargain towards a collective agreement. See ibid. 202 NABET and CKLWRadio Broadcasting Ltd (Re), 11 C.L.L.C. 16,110 (Can.); CALPA and Eastern Provincial Airways Ltd, 84 C.L.L.C. 16,012 (Can.). 203 Centre Jubilee Centre v. United Steelworkers of America, 95 C.L.L.C. 220-005 (O.L.R.B.); New Method Laundry and Dry Cleaners, 57 C.L.L.C. 18,059 (O.L.R.B.); Glass, Molder, Pottery & O 'rs and Barber Industries, 89 C.L.L.C. 16,024 (Alta. L.R.B.). 2 0 4 Nor in any other collective bargaining legislation in Canada. 2 0 5 Such cases now generally take the form of unfair labour practice claims, although prior to the 1970s the usual avenue for securing compliance with the duty was through a prosecution in the general courts. Then, in the 1970s, labour boards, or their equivalent, were given jurisdiction over the duty, and a body of jurisprudence involving unfair labour practice claims has since developed. See G. Adams, at para. 10.1440; D. Carter, The Expansion of Labour Board Remedies. A New Approach to Industrial Conflict (Kingston, Industrial Relations Centre, 1976). 2 0 6 Corry, at 8-1. 41 T h e duty to bargain in g o o d faith places an onus on the parties to engage in a process o f give and take, o f making acceptable compromises, and o f seeking solutions to the issues before them. This is the real form and process o f contracting that society seeks to preserve w h e n it looks at the underlying values o f freedom o f contract. O u r society does not seek to protect the conduct o f a party w h o seeks to deliberately frustrate or prevent the rights o f another party to engage in the process o f free collective b a r g a i n i n g . 2 0 7 This comment is indicative o f the approach that has been taken by the B C B o a r d when assessing a c la im that a party has failed to bargain in g o o d faith. In essence, it is easier to identify bad faith conduct than it is to state what it is that a party must do i n order to bargain i n g o o d faith. A s a result, the duty has been applied by the B o a r d so as to prohibit certain bad faith c o n d u c t . 2 0 8 Thus, in order to make out a c la im that its counterpart has failed to bargain i n g o o d faith, an applicant w i l l be required to adduce sufficient evidence o f prohibited conduct. In terms o f assessing a party's conduct, the test applied by the B C B o a r d is both subjective and objective: B o a r d decisions have established that the question o f whether a party is bargaining in g o o d faith is governed by both an objective and a subjective test. T h e subjective test relates to the motivat ion o f the parties. I f it is determined that one o f the parties is only g o i n g through the motions, that party has failed the subjective test o f bargaining in g o o d faith. The B o a r d can, however, determine that a party is fail ing to make every reasonable effort to conclude a collective agreement by an objective analysis o f that party's a c t i o n s . 2 0 9 207 Yarrow Lodge Limited and HEU (Re) (1994), 21 C.L.R.B.R. (2d) 1 (B.C.) [hereinafter "Yarrow Lodge"] at 25. (Sub nom, Yarrow Lodge Ltd v. Hospital Employees Union, 94 C.L.L.C. 16,047 (B.C.)). 2 0 8 G. Adams, at para 10.1400. To some extent, however, this is a matter of phraseology. By describing a prohibited act in the negative (i.e., a "refusal" to do something), the BC Board is, in effect, saying that a party is obliged to carry out that act (hence the description of the duty as encompassing a set of procedural requirements). 2 0 9 Labour Relations Board of British Columbia, Information Bulletin No. 10: Duty to Bargain in Good Faith (Effective 4/1/1995) at 2. See also Royal Oak Mines Inc v. Canada (Labour Relations Board) (1996), 133 D.L.R. (4th) 129 (S.C.C.) where the Supreme Court discusses the subjective and objective limbs of good faith bargaining; and further, G. Adams, at para. 10.1575. 42 In practice, however, the distinction between the objective and subjective l imbs o f the duty is frequently blurred, for a court 's or adjudicator's conclusions regarding the subjective test are often grounded i n a global assessment o f a party 's conduct. C o n d u c t w h i c h may evidence breach o f either (or both) the subjective or objective elements o f g o o d faith bargaining includes: 1. Refus ing to bargain, without proper r e a s o n . 2 1 0 A justifiable reason could be that the other party has refused to specify w h o has authority to bargain on its behalf, 2 or that an impasse has been reached and that a further session w o u l d not be f r u i t f u l . 2 1 2 2. Imposing unjustified or extraneous preconditions to b a r g a i n i n g . 2 1 3 3. Refus ing to meet o n a timely b a s i s , 2 1 4 or avoiding meetings. 4. Sending a representative to the bargaining table w h o does not have authority to settle o r knowledge o f the issues involved i n the negot ia t ions , 2 1 5 o r frequently changing the makeup o f a negotiating t e a m . 2 1 6 5. Seeking to dictate the makeup o f another party 's negotiating t e a m . 2 1 7 6. Refus ing to disclose one's proposals or d e m a n d s . 2 1 8 7. Refus ing to explain and justify one's p r o p o s a l s . 2 1 9 2 1 0 Kaycee Enterprises v. Industrial Wood & Allied Workers of Canada, hoc. 1-85, 96 C.L.L.C. 220-024 (B.C.L.R.B.). 211 BFCSD andDiversey Wyandotte Inc. (Re), [1985] O.L.B.Rep. 405 (Ont.). 2X2IAMLoc. 2309 andNordair Ltd (Re), 85 C.L.L.C. 16,023 (Can.L.R.B.). 2 1 3 BC Rail Ltdv. Council of Trade Unions on BC Rail, 93 C.L.L.C. 16,072 (B.C.L.R.B.); School District No. 44 (North Vancouver) and North Vancouver Teachers Association (Re), 92 C.L.L.C. 16,067 B.C.I.R.C.); Northwood Pulp & Timber Ltdv. CEP Loc 603, 95 C.L.L.C. 220-001 (B.C.L.R.B.). 214 Starbucks Corporation and N.A.A.A.I.W.U. Loc. 3000 (1997), 35 C.L.R.B.R. (2d) 244 (B.C.). 215 L.I. UNA., Loc. 1059 v. Old Oak Properties Inc, [1996] O.L.R.B.Rep. 648 (Ont.); Fotomat Canada Ltd, [1981] 1 Can.L.R.B.R. 381 (Ont.). 2 1 6 Labour Relations Board of British Columbia, Information Bulletin No. 10: Duty to Bargain in Good Faith (Effective 4/1/1995) at 4. 217 British Columbia Telephone Co., [1977] 2 Can.L.R.B.R. 404 (Can.). 2 1 8 Celgar Pulp Co. v. Pulp, Paper & Wood-Workers of Canada, Locals 1 & 15 (1991), 13 C.L.R.B.R. (2d) 161 (B.C.I.R.C.). 43 8. Refus ing to discuss or explore the proposals o f the other s ide. 2 2 " 9. Refus ing to disclose such information as is necessary to ensure rational and informed discussion (such as the wages rates, benefits, and classification structures o f those represented by the u n i o n ) . 2 2 1 10. Deliberately tabling an inflammatory proposal w h i c h w o u l d l ikely p r o v o k e a b r e a k d o w n in negot ia t ions . 2 2 2 11. E n g a g i n g i n "surface b a r g a i n i n g " 2 2 3 (g iv ing the appearance o f engaging in col lect ive bargaining w i t h no real intent to ever conclude an agreement) . 2 2 4 12. " B o u l w a r i s m " . 2 2 5 13. Ef fect ing a misrepresentation or refusing or fail ing to disclose material information, whether solicited or u n s o l i c i t e d . 2 2 6 14. Insisting on demands that are i l l e g a l , 2 2 7 contrary to the provisions or scheme o f the B C C o d e , 2 2 8 or beyond the p o w e r o f the other party to g r a n t . 2 2 9 2 1 9 Canadian Association of Industrial, Mechanical and Allied Workers, and Noranda Metal Industries Limited, [1975] 1 Canadian L.R.B.R. 145 (B.C.) [hereinafter, "Noranda"]; Corry, at 8-15. 2 2 0 Pulp & Paper Industrial Relations Bureau, 77 C.L.L.C. 16,109 (B.C.L.R.B.); Corry, at 8-15. 221 Starbucks Corporation and N.A.A.A.I.W.U., Loc. 3000 (1997), 35 C.L.R.B.R. (2d) 244 (B.C.); Hey-Way '-Noqu' Healing Circle for Addictions Society v. B. C. Government and Service Employees' Union (B.C.L.R.B. No. B414/95) (B.C.); Noranda, at 162. Claims of poor financial performance, for example, will require supporting information. 2 2 2 Royal OakMinesv. Canada (Labour Relations Board) (1996), 133 D.L.R. (4th) 129 (S.C.C.); Tan Jay Co. andl.L.G.W. Loc 286 (Re) (1986), 16 C.L.R.B.R. (N.S.) 350 (Man.). 2 2 3 The Daily Times and Toronto Typographical Union No. 91, [1978] 2 Canadian L.R.B.R. 446 (Ont.). 2 2 4 Yarrow Lodge at 29. A history of "anti-union animus" and unfair labour practices may be relevant in determining whether an inflexible position constitutes "surface bargaining". See Starbucks Corporation and N.A.A.A.I.W.U. Loc. 3000 (1997), 35 C.L.R.B.R. (2d) 244 (B.C.). 2 2 5 A term coined in the 1940s in the United States after Lemuel Boulware, then vice president of General Electric, who promoted the strategy of presenting a one off proposal on the basis of "That's it. Either take it or leave it". For United States authority prohibiting this practice, see e.g., N.L.R.B. v. General Elec. Co. 418 F.2d 736 (2d Cir. 1969). The term "ultimatum bargaining" has been used analogously in British Columbia. See e.g., School District No. 44 (North Vancouver) and North Vancouver Teachers Association (Re) (1992), 17 C.L.B.R. (2d) 254 (B.C.). 2 2 6 Starbucks Corporation and N.A.A.A.l. W. U. Loc. 3000 (1997), 35 C.L.R.B.R. (2d) 244 (B.C.); Noranda, at 162; Westinghouse Canada Ltd, 80 C.L.L.C. 16,053 (O.L.R.B.). 227 Kaycee Enterprises v. Industrial Wood & Allied Workers of Canada, Loc. 1-85, 96 C.L.L.C. 220-024 (B.C.L.R.B.); Northwood Pulp & Timber Ltdv. CEP Loc 603 (1994), 23 C.L.R.B.R. (2d) 298; Vancouver Symphony Society v. IATSE Loc. 118(1993), 17 C.L.R.B.R. (2d) 161 (B.C.I.R.C.); V. /. Care Management Ltdv. I.U.O.E. Loc. 822 (1993), 19 C.L.R.B.R. (2d) 153; 94 C.L.L.C. 16,004 (B.C.); Otis 44 15. Seeking to undermine the relationship between a union and its members (by, for example, sending bargaining material to employees without first having discussed it w i t h their u n i o n ) . 2 3 0 16. B y p a s s i n g a union (without its consent or acquiescence) and negotiating directly w i t h e m p l o y e e s . 2 3 1 17. Suddenly tabling a new demand or revoking an existing offer without a compel l ing 232 reason. 18. Reneging o n agreements made during the course o f b a r g a i n i n g . 2 3 3 19. W i t h d r a w i n g f rom negotiations without proper reason (for example, w i t h d r a w i n g before a genuine impasse is arrived a t ) . 2 3 4 20. T a k i n g a strike vote without first having discussed all collective bargaining issues i n d i s p u t e . 2 3 5 Elevator Co Ltd v. International Union of Elevator Constructors, Loc. No 82 (1973), 35 D.L.R. (3d) 566 (B.C.C.A.). For discussion on the scope of "illegality" in this context, see D. Carter, "The Duty to Bargain in Good Faith: Does it Affect the Content of Bargaining" in K. Swan & K. Swinton eds., Studies in Labour Law (Toronto, Butterworths, 1983) at 35. 2 2 8 An example would be an insistence by an employer that it not be required to re-engage striking employees following settlement (see Labour Relations Board of British Columbia, Information Bulletin No. 10: Duty to Bargain in Good Faith (Effective 4/1/1995) at 4). See also Health Employers Association of British Columbia and BC Government and Service Employees Union (1997) 33 C.L.R.B.R. (2d) (B.C.). Note that section 49(3) of the BC Code provides that a party is not required to execute an agreement that conflicts with a requirement of or under the Code. 2 2 9 Western Wholesale Drug Ltd v. R.W.D.S.U, [1971] 4 W.W.R. 207 (B.C.S.C.). 2 3 0 B.C. Hydro and Power Authority (B.C.L.R.B. No. B 395/94) (B.C.). 2 3 1 By, for example, proffering contracts or proposals directly to staff rather than to their authorised representative. See e.g., Roto-Rooter Canada Ltd v. U.A.JA.P.P.I., Loc. 170, [1997] B.C.L.R.B.D. No. 35 (B.C.); Glenwood Label and Box Manufacturing Ltd and Communication, Energy and Paperworkers Union of Canada, Loc. 226, [1996] B.C.L.R.B.D. No. 300 (B.C.); CUPE and Canadian Broadcasting Corporation (1995) 27 C.L.R.B.R. 100 (Can.); Cariboo College v. Cariboo College Faculty Association (1983), 4 C.L.R.B.R. (N.S.) 320 (B.C.). 2 3 2 Graphic Centre (Ontario) Inc, [1976] 2 Can.L.R.B.R. 118 (Ont.). 2 3 3 Kaycee Enterprises v. Industrial Wood & Allied Workers of Canada, Loc. 1-85, 96 C.L.L.C. 220-024 (B.C.L.R.B.). 234 North Vancouver School District No 44 v. North Vancouver Teachers Association, 92 C.L.L.C. 16,067 (B.C.I.R.C.); Marian Regional High School Education Committee v. Catholic Secondary School Teachers Association (1988), 6 C.L.R.B.R. (2d) 102 (B.C.I.R.C.). 2 3 5 CiticB.C. Inc. and Power Consolidation (China) Pulp Inc. (1992), 13 C.L.R.B.R. (2d) 161 (B.C.I.R.C.); BC Rail Limited (B.C.L.R.B. No. B131/93) (B.C.). 45 These actions can be contrasted w i t h a number w h i c h have been held not to constitute evidence o f a breach o f the duty, including: 1. H a r d bargaining (taking an uncompromis ing posit ion on an issue, whilst at the same time genuinely seeking a r e s o l u t i o n ) 2 3 6 2. Sending to employees non-coercive communications detailing such matters as the status o f the w o r k p l a c e or its operation, the outcome o f negotiation m e e t i n g s , 2 3 7 the l ikely effect o f industrial action, and proposals already provided to u n i o n o f f i c i a l s . 2 3 8 3. Shutting an operation d o w n because o f financial necessity, notwithstanding the existence o f unresolved labour negot iat ions . 2 3 9 4. C o n t i n u i n g to operate during a strike or lockout , subject to the prohibit ions on using replacement l a b o u r . 2 4 0 5. F a i l i n g to reach agreement or make concessions. In respect o f this final point, it is important to note that the underlying phi losophy o f the duty: [EJmbraces " a freedom o f contract" rationale, that the parties are best able to determine the content o f their agreement and, fail ing agreement, each has recourse 2 3 6 APS Architectural Precast Structures Ltd v. C.S.W.U. Loc. 1611, [1998] B.C.L.R.B.D. No. 233 (B.C.); Marian Regional High School Education Committee v. Catholic Secondary School Teachers Association (1988), 6 C.L.R.B.R. (2d) 102 (B.C.I.R.C.); Western Canada Steel Ltd'v. C.A.I.M.A.W, Loc. 6, 91 C.L.L.C. 16,016 (B.C.I.R.C.). 237 Glenwood Label and Box Manufacturing Ltd and Communication, Energy and Paperworkers Union of Canada, Loc. 226, [1996] B.C.L.R.B.D. No. 300 (B.C.). 238 Insurance Corporation of British Columbian. Office & Technical Employees Union, Loc. 378, [1978] 1 Can.L.R.B.R. 53 (B.C.). 2 3 9 Starbucks Corporation andN.A.A.A.I. W. U. Loc. 3000 (1997), 35 C.L.R.B.R. (2d) 244 (B.C.). See also BC Code, s. 63(1). 2 4 0 For discussion on these prohibitions, see infra notes 252-253. 46 to economic sanctions. The cases therefore reveal a reluctance by labour boards to review the fairness o f proposals.. . . 2 4 1 ... [According ly] a resulting impasse in bargaining w i l l not be found to stem from breach o f the duty o f g o o d faith i f it can be said that the proponent is merely using its economic posi t ion to negotiate terms w h i c h favour its legitimate interests . 2 4 2 In accordance w i t h this philosophy, the B C B o a r d has repeatedly refused to enter into an assessment o f whether a particular proposal is reasonable. 2 4 3 A s the B C B o a r d has stated: A failure to reach a collective agreement because o f a determination not to make the concessions necessary to secure the consent o f the other side is not, in and o f itself, an unfair labour practice. It w o u l d be inconsistent w i t h the fundamental po l i cy o f the C o d e - the fostering o f free collective bargaining - for the B o a r d to evaluate the substantive positions o f each party, to decide w h i c h is the more reasonable, and then to find the other party to be committ ing an unfair labour practice for not m o v i n g in that direction. ... T h e theory o f the C o d e is that each side i n collective bargaining is entitled to adopt the contractual proposals w h i c h are i n its o w n interest, to stick firmly to its bargaining positions, and then to rely o n its economic strength in a strike to force the other side to make concess ions . 2 4 A c c o r d i n g l y , the B C B o a r d w i l l not inquire into the substance o f a party 's proposal , except in certain l imited circumstances: In regulating the statutory duty to bargain in g o o d faith n o w contained in Sect ion 11 o f the C o d e , the B o a r d is primarily concerned w i t h the process o f col lect ive bargaining. There may nonetheless be occasions where the substance o f col lective bargaining (i.e., a proposal being advanced by one o f the parties) overlaps w i t h process or otherwise calls for scrutiny. T h e circumstances in w h i c h the B o a r d w i l l intervene are where specific demands are il legal, are inconsistent w i t h the law and pol icy o f the statute, or constitute evidence o f bad faith bargaining 2 4 5 2 4 1 G. Adams, at para. 10.1400. 2 4 2 G. Adams, at para. 10.1540. 2 4 3 See recently, APS Architectural Precast Structures Ltdv. C.S.W.U. Loc. 1611, [1998] B.C.L.R.B.D. No. 233. See also AccurpressManufacturing Limited (B.C.L.R.B. No. 70/93). 2 4 4 Noranda, at 159. 2 4 5 NorthwoodPulp & Timber Ltdv. CEP Loc 603 (1994), 23 C.L.R.B.R. (2d) 298 (B.C.) at 319-320. A proposal which is extreme in its unreasonableness is likely, for example, to constitute evidence of bad faith conduct. For discussion on the extent to which labour boards examine the substance of proposals, see B. Adell, The Duty to Bargain in Good Faith: Its Recent Development in Canada (Kingston, Industrial 47 N o r is the B C B o a r d w i l l i n g to intervene i n negotiations between parties committed to achieving a resolution, even although considerable " to- ing arid f r o - i n g " may occur in the process, inc luding the use o f lawful strikes and lockouts. A s was noted in the Noranda case, whi le the duty requires adherence to certain fundamental principles o f reasonable bargaining procedure, the B o a r d has recognised that it "must exercise considerable restraint in intervening in negotiations between parties w h o are committed to reaching a col lect ive agreement ." 2 4 6 In summary, then, the duty to bargain g o o d faith compels preparation, attendance, disclosure o f one's proposals, justif ication, consideration o f counter-proposals, discussion and perseverance w i t h bargaining unti l either a settlement or a genuine impasse is reached. T h e duty also prohibits conduct l ikely to undermine rational and constructive bargaining. B e y o n d that, it is generally for the parties to determine what is agreed u p o n , 2 4 7 and, in the usual course, provided both parties have bargained in g o o d faith, each w i l l be entitled to effect economic sanctions in the event o f impasse. 2.2 The Substance of the Duty to Bargain in Good Faith T o appreciate fully the nature o f the duty to bargain in g o o d faith as it applies in B r i t i s h C o l u m b i a , it is necessary to l o o k beyond the core enacting provis ion, to those sections o f the B C C o d e that give the duty substance and support. First , as noted, the duty to bargain in g o o d faith is triggered by a notice to bargain, w h i c h can be given by either party. T h e recipient o f the notice is obliged to commence Relations Centre, 1980) and B. Langille & P. Mackless, "Beyond Belief: Labour Law's Duty to Bargain" (1988) 13 Q.L.J. 62. 2 4 6 Noranda, at 161. 2 4 7 Note, however, the potential for arbitration in relation to first collective agreements (see infra notes 291-292) and for the imposition of terms in extreme cases (see infra notes 308-316). 48 bargaining w i t h i n ten days. W h e r e an existing collective agreement is due to expire and the parties have not g iven notice 90 days or more before the expiry date, notice is deemed to be given and both parties are then obliged to commence b a r g a i n i n g . 2 4 9 These provis ions support the obl igation o f g o o d faith by establishing an enforceable commencement mechanism, thereby reducing the opportunity for procrastination or deliberate delay. Secondly, the B C C o d e encourages g o o d faith bargaining by restricting alternatives. Sect ion 59(1) o f the C o d e prohibits employers and unions effecting strikes or lockouts unti l after they have bargained collectively in accordance w i t h the requirements o f the C o d e . A l t h o u g h this section does not require the discussion o f a particular checklist o f proposals or d e m a n d s , 2 5 0 before a party can take a strike (or lockout) vote they must have discussed w i t h the other party their respective positions o n the issues in d i s p u t e . 2 5 1 A failure to do so w i l l l ikely result in a labour board holding that a strike or lockout notice is inval id, thereby sending the parties back to the bargaining table. A d d i t i o n a l l y , section 62(1) o f the B C C o d e provides that: I f employees are lawful ly on strike or lawful ly l o c k e d out, their health and welfare benefits, other than pension benefits or contributions, normally provided directly or indirectly by the employer to the employees must be continued i f the trade union tenders payment to the employer or to any person w h o was before the strike or l o c k o u t obligated to receive the payment. This p r o v i s i o n eliminates one avenue o f bad faith bargaining conduct: the ability o f employers to exert pressure on their employees not through bargaining, but by cancell ing their health and welfare benefits. I f permitted to occur, conduct o f this k i n d c o u l d impact 2 4 8 BC Code, s. 46. 2 4 9 BC Code, s. 46(4). 2 5 0 Otic BCInc and Power Consolidated (China) Pulp Inc & Ors and Woodworkers of Canada, Locs. 1 and 151, (I.C.R. No. C170/91), upheld (1992), 13 C.L.R.B.R. (2d) 161 (B.C.I.R.C.). 251 Ibid. See also Yarrow Lodge, at 11. 49 significantly o n the wel l -being o f both striking or locked out employees, and their dependants, thus p r o v i d i n g considerable (albeit bad faith) leverage in a bargaining dispute. T h e B C C o d e also restricts the use o f replacement labour during a strike or a lockout . Sect ion 68(1) o f the B C C o d e prohibits the use o f outside replacement w o r k e r s to cover for employees w h o are lawful ly striking or l o c k e d o u t , 2 5 2 whi le section 68(2) further provides that an existing employee cannot be directed against his or her w i l l to perform the w o r k o f a striking or l o c k e d out co l league . 2 5 3 These provisions c o u l d be v i e w e d as enhancing the prospects o f g o o d faith bargaining (to the extent that they require an employer to l o o k to an agreed resolution as the primary means for ending an impasse, rather than simply engaging replacement workers and continuing a strike or lockout i n d e f i n i t e l y ) , 2 5 4 although this v i e w is not universally endorsed throughout B r i t i s h C o l u m b i a and C a n a d a . 2 5 5 2 5 2 See e.g., Davis Wire Industries Ltd (Re), [1998] B.C.L.R.B.D. No. 148 (B.C.); A.B. Lumber Co. (Re), [1998] B.C.L.R.B.D. No. 53 (B.C.); Fletcher Challenge Canada Ltd (Re), [1997] B.C.L.R.B.D. No. 387 (B.C.); Glenwood Label and Box Manufacturing Ltd and Communication, Energy and Paperworkers Union of Canada, Loc. 226, [1996] B.C.L.R.B.D. No. 300 (B.C.). Section 68 is often used by unions as an organising tool, in that employees are encouraged to vote for the certification of a union on the basis that they will then have the option of striking in furtherance of their contractual demands whilst protected against the use of outside replacement workers. See M.A. Hickling, "Flexibilization of the Workplace: Observations on Aspects of the Canadian Position" (Paper delivered to the XVth International Congress on Comparative Law, Bristol, 1998) at 45. 2 5 3 It is of interest to note that while the BC Code does not specifically address the issue of whether lawfully striking employees can be dismissed, section 1(1) of the Code provides that a persons "does not cease to be an employee within the meaning of this Code by reason only of ceasing work as a result of (a) a strike that is not contrary to this Code ... [or] ... (c) a lockout." In practice, unions will generally insist that striking employees are re-engaged as a condition of settlement (see Corry, at 9-44). Moreover, a refusal to re-engage a striking worker after a strike has concluded (or a refusal to arbitrate the matter) could expose an employer to an unfair labour practice claim (on the basis of discriminatory conduct against union members). For these reasons, the issue of employers refusing to re-engage strikers seldom arises. 2 5 4 A practice which has occurred in New Zealand. See supra note 123. 2 5 5 Only British Columbia and Quebec operate this prohibition, Ontario having repealed a similar provision in 1995. Given that good faith bargaining is already a prerequisite to an employer effecting a lockout, it could be argued that the prohibition on the use of replacement workers serves primarily to enhance the bargaining power of unions and the associated vulnerability of employers to shut down, rather than promoting good faith bargaining. Because of these conflicting views, this type of prohibition was, and remains, controversial. See e.g., J. Baigent et al., A Report to the Honourable Moe Sihota Minister of Labour. Recommendations for Labour Law Reform (Ministry of Labour and Consumer Services, September 1992) at 43-44; P. Weiler, Reconcilable Differences (Toronto, Carswell, 1980) at 77-78; D. Carter, The Changing Face of Labour Law ((Kingston, Industrial Relations Centre, 1993) at 8; G. 50 Third ly , the B C C o d e facilitates g o o d faith bargaining by restricting the ability o f an employer to alter the terms o f its employees' employment during negotiations. In the case o f a recently certified union, for example, an employer is unable to effect changes unti l four months after the date o f certification or until the date an agreement is executed, whichever occurs first.256 Certa in restrictions also apply in cases where parties are seeking to negotiate the renewal or replacement o f an expired agreement . 2 5 7 Unless pr ior approval o f the B C B o a r d is o b t a i n e d , 2 5 8 unilateral changes effected in breach o f these restrictions w i l l g r o u n d an unfair labour practice c l a i m . 2 5 9 G o o d faith is enhanced by these restrictions, for without them an employer could seek to undermine or discredit a union, or " p u n i s h " its employees for having chosen to engage in collective bargaining, by altering terms unilaterally during negotiations. Fourthly , the B C C o d e reinforces the obligation o f g o o d faith by restricting what an employer can convey directly to its employees during the certification procedure and Hopkinson, "Holding the Line: A Defence of Anti-scab Laws" (1996) 4 Can.Lab.& Emp. L.J. 137. Other provinces have sought a middle ground by prohibiting the use of professional strike breakers. See e.g., Man. Labour Relations Act (s. 14(1), (2)) and Ont. Labour Relations Act 1995 (s. 78). In the most recent review of the BC Code, the reviewing panel recommended a relaxation of the prohibition, to the extent that employers would be permitted to move managers between different places of operation. See V. Ready, S. Lanyon, M. Gropper & J. Matkin, Managing Change in Labour Relations - The Final Report (Labour Relations Code Review Committee, 25 February, 1998) [hereinafter "Managing Change"] at 5 & 59-60. 2 5 6 BC Code, s. 45(l)(b). Notably, the 1998 review on the BC Code recommended the extension of the four month period to eight months. See Managing Change, at 53-54. 2 5 7 BC Code, s. 45(2), which prohibits the unilateral alteration of any term or condition of employment until a strike or lockout occurs, or an agreement is reached, or the union is decertified (a period often referred to as the "statutory freeze" period). This provision was enacted in response to the decision in Paccar of Canada Ltd v. C.A.I.M.A. W. (1990), 62 D.L.R. (4th) 437 (S.C.C.) in which the Supreme Court held that the previous restrictions on unilateral alteration applied only to first agreements. 2 5 8 BC Code, s. 45(3). 2 5 9 See e.g., D&D Pallets and Lumber (Re), [1998] B.C.L.R.B.D. No. 273 (B.C.); J.R.J. Trucking Ltd and Teamsters Loc. 213 (1994) B.C.L.R.B. No. B505/94 (B.C.). Interim relief against alterations of this nature may also be available, pending a full hearing of an unfair labour practice claim. See e.g., RBA Canada Inc and Loc. 213 of the International Brotherhood of Electrical Workers, [1997] B.C.L.R.B.D. No. 31 (B.C.). Note, however, that unilateral changes can be effected after the expiry of a collective agreement and the statutory freeze period. C.f, the binding effect of terms of employment in New Zealand notwithstanding the expiry of a collective employment contract, at least in theory. See infra notes 404-405. 51 subsequent negotiations. Sending coercive or intimidating communicat ions to an employee i n an attempt to influence his or her initial decision to vote for certif ication w i l l constitute a breach o f an employee's right to freedom o f assoc ia t ion . 2 6 0 Sending such communicat ions f o l l o w i n g certification w i l l l ikewise contravene the duty to bargain in g o o d faith. Similarly, an employer w i l l be in breach o f the duty i f it bypasses a certified u n i o n (without the union 's consent or acquiescence) and negotiates directly w i t h its e m p l o y e e s . 2 6 1 T h e distinction between direct bargaining and permissible communicat ions is covered, i n part, by section 8 o f the B C C o d e , w h i c h provides: N o t h i n g in this C o d e deprives a person o f the freedom to communicate to an employee a statement o f fact or opinion reasonably held w i t h respect to the employer 's business. T h e B C B o a r d has elaborated o n this provis ion in a number o f decisions, inc luding Cardinal Transportation v. CUPE Loc. 561 and Ors.262 In order to c o m p l y w i t h section 8, the statement made must be accurate ( i f it is a statement o f fact) or reasonably held ( i f it is an opinion) , particularly in the final stages o f negotiations or where employees are directed to attend "capt ive" meetings during w o r k t i m e . 2 6 3 H o w e v e r , m i n o r inaccuracies in statements conveyed w i l l seldom i f ever constitute a breach o f the duty. In this regard, the B o a r d has taken a pragmatic approach by recognising that i f it: 2 6 0 BC Code, ss. 4(1), 6 & 9. See e.g., Cardinal Transportation v. CUPE Loc. 561 and Ors (1996), 34 C.L.B.R. (2d) 1 (B.C.) [hereinafter "Cardinal Transportation"]; Milton Ventures Ltd v. Teamsters Loc. 213, [1996] B.C.L.R.B.D. No. 281 (B.C.). 2 6 1 Some collective agreements expressly contemplate additional direct negotiations between employer and employee. Examples include the collective agreements governing major league baseball, hockey and basketball (all of which are played in Canada and the United States). In each of these sports, the applicable collective agreement sets out the core provisions, but allows players to negotiate their own salaries directly with the owners or general managers of their teams. See B. Burke, "Negotiation Involving Agents and General Managers in the NHL" (1993) 4 Marq.S.L.J. 35. Moreover, even where a collective agreement makes no mention of direct negotiations, a union may be held to have delegated its authority to bargain if it consents or acquiesces to direct negotiations. See M. A. Hickling, "Status of Collateral, Ancillary or 'Side' Agreements in Labour Relations" (Continuing Legal Education Society of British Columbia, December 1986) at 17. 2 6 2 Cardinal Transportation. 2 6 3 Ibid. See also B.C. Hydro and Power Authority (B.C.L.R.B. No. B 395/94) (B.C.). 52 [W]ere asked to evaluate every distort ion o f fact or inflation o f o p i n i o n contained in material wri t ten during heated collective bargaining disputes, [it] w o u l d be doing little e l s e . 2 6 4 C o m m u n i c a t i o n s that w i l l clearly fall outside the scope o f section 8 w i l l include comments w h i c h are disparaging o f a union or a union official or w h i c h constitute an anti-union c a m p a i g n ; 2 6 5 statements w h i c h w o u l d reasonably have the effect o f coercing, int imidating or exercising undue influence over an employee as regards his or her decis ion to engage i n col lect ive bargaining through a representative; 2 6 6 and proposals or offers that have not yet been discussed w i t h the u n i o n . 2 6 7 Fifthly, g o o d faith bargaining is enhanced by section 49(3) o f the B C C o d e , w h i c h provides that i f " a n agreement is reached as the result o f collective bargaining, both parties must execute i t . " This section wards against a party reneging o n a previously agreed sett lement. 2 6 8 Whether an "agreement" has been reached, is a question o f fact to be determined objectively by reference to all the circumstances o f a particular c a s e . 2 6 9 T h e B C C o d e further facilitates g o o d faith by requiring that all col lective agreements contain certain specified provisions, including a m i n i m u m one year t e r m ; 2 7 0 a "consultat ion committee p r o v i s i o n " ; 2 7 1 a clause prohibit ing strikes and lockouts during the term o f the 2 6 4 Noranda, at 161. 2 6 5 Ibid. See also Paladin Security Group Ltd (Re), [1998] B.C.L.R.B.D. No. 45 (B.C.). 2 6 6 See e.g., Cardinal Transportation; JackJuusola Sales Ltd (Canadian Tire Kamloops) (Re), [1998] B.C.L.R.B.D. No. 147 (B.C.); Semiahmoo Management Ltd (Re), [1998] B.C.L.R.B.D. No. 12 (B.C.). 2 6 7 See e.g., B.C. Hydro and Power Authority (B.C.L.R.B. No. B 395/94) (B.C.). 2 6 8 See e.g., British Columbia Institute of Technology v. B.C.G.E.U., [1976] 2 Can.L.R.B.R. 356 (B.C.). 2 6 9 White Spot Ltd and Canadian Food and Associated Services Union, [1976] 1 Canadian L.R.B.R. 145 (B.C.); Berger andRainer Trucking Ltd, [1974] 1 Canadian L.R.B.R. 465 (B.C.); DeMarco Health Care Inc and Hospital Employees Union (B.C.L.R.B. No. B237/97) (B.C.). 2 7 0 BC Code, s. 50(1). 2 7 1 BC Code, s. 53. In the absence of an agreed clause, the following clause applies by default: "On the request of either party, the parties must meet at least once every two months until this agreement is terminated, for the purposes of discussing issues relating to the workplace that affect the parties or any employee bound by this agreement." (See BC Code, s. 53(3)). For discussion on the operation of clauses of this nature, see e.g., Pacific Press and GCIU, Loc. 25-C (1995), B.C.L.R.B. No. B52/95. 53 agreement , 2 7 2 and clauses detailing procedures for the resolution o f g r i e v a n c e s 2 7 3 and disputes o f r i g h t . 2 7 4 T h e B C C o d e also provides that where requested by a u n i o n negotiating a first col lective agreement, an employer must agree that all employees i n the bargaining unit w i l l pay u n i o n d u e s . 2 7 5 In rendering these clauses mandatory, the B C C o d e removes them as a source o f bargaining conflict, and facilitates the orderly settlement o f particular disputes that may arise during the term o f an agreement. In so doing, the C o d e fosters co-operat ion and the avoidance o f acrimonious economic sanctions. T h e B C C o d e also recognises that bargaining can be impeded by employers that operate in more than one province, or i n more than one corporate form. Sect ion 52 o f the C o d e provides that an extra-provincial company must appoint a resident o f B r i t i s h C o l u m b i a as its bargaining representative,, or face one being appointed by the M i n i s t e r o f L a b o u r . 2 7 6 Companies cannot, then, use the provincial line, or the existence o f a distant head office, to frustrate col lective bargaining. In addition, section 37 o f the C o d e details a "successor" employer procedure w h i c h wards against employers seeking to evade the duty to bargain in g o o d faith by r e s t r u c t u r i n g . 2 7 7 A s the B C B o a r d noted in Wilson Place Management Ltd (re) and Hospital Employees' Union:21* [Section] 37 can play an important role where a union seeks to enforce the duty to bargain in g o o d faith against an employer that arbitrarily shifts its w o r k force f r o m the payrol l o f one legal entity to a n o t h e r . 2 7 9 2 7 2 BC Code, s. 58. 2 7 3 BC Code, s. 84(1). 2 7 4 BC Code, s. 84(3). 2 7 5 BC Code, s. 6(3)(f). This is the minimum union security clause which an employer must agree to when requested, and is known as the "Rand Formula". See G. Adams, at para. 10.1550; Corry, at 2-15. 2 7 6 A review of BC Board decisions failed to locate any reported instance where the Minister of Labour had exercised the power conferred by this section, presumably because employers would be loath to be represented by an appointee. 2 7 7 For discussion on "successor employers" see e.g., Wilson Place Management Ltd (Re), [1997] B.C.L.R.B.D. No. 397 (B.C.); Napier Intermediate Care Home Ltd (Re), [1997] B.C.L.R.B.D. No. 191 (B.C.). 2 7 8 Ibid. 2 1 9 Ibid, at 5. 54 Similarly , section 38 provides the B C B o a r d w i t h the power to treat t w o or more employers as one for the purposes o f the C o d e , 2 8 0 a power w h i c h can also be uti l ised to prevent an employer evading the duty o f g o o d faith. Depending on the circumstances o f a particular case, it may be possible for a union to invoke both sections 37 and 3 8 . 2 8 1 T h e duty o f g o o d faith derives further, and considerable support f r o m the various dispute resolut ion procedures provided for i n the B C C o d e , including mediation and arbitration. In terms o f mediation, the Associate Chair o f the M e d i a t i o n D i v i s i o n may appoint a mediator to assist i n the negotiation o f a first collective agreement . 2 8 2 H e or she can also appoint a mediator to assist i n the negotiation o f any collective agreement, prov ided at least one party has applied in wr i t ing for the appointment o f a m e d i a t o r . 2 8 3 Significantly, i f a mediator is appointed under either o f these procedures, the parties are prohibited f r o m striking or l o c k i n g out for a prescribed p e r i o d . 2 8 4 A d d i t i o n a l l y , the M i n i s t e r o f L a b o u r can, at any time, appoint a mediation officer i f the M i n i s t e r considers that an appointment is l ikely to facilitate sett lement, 2 8 5 and he or she also has the p o w e r to appoint a special mediator to assist in collective b a r g a i n i n g . 2 8 6 T h e C o d e further provides for the appointment o f Fact F i n d e r s 2 8 7 and Industrial Inquiry C o m m i s s i o n s , 2 8 8 both o f w h i c h can be util ised to resolve bargaining impasses. 2 8 0 See e.g., Landmark Completion Contractors et al and I. A.B.S.O.I. W. Loc. 97 and O 'rs, [1996] B.C.L.R.B.D. No. 309 (B.C.); Emit Anderson Construction Co Ltd et al and WOE, Loc. 115 et al (1995), B.C.L.R.B. No. B265/95 (B.C.). 2 8 1 See e.g., White Spot Ltdv. CAW-Canada, 98 C.L.L.C. 220-018 (B.C.S.C.). 2 8 2 BC Code, s. 55. See infra notes 291-293 and accompanying text. 2 8 3 BC Code, s. 74(1). 2 8 4 See BC Code, ss. 60(3)(b)(iv) and 55. 2 8 5 BC Code, s. 74(4). 2 8 6 BC Code, s. 76. 2 8 7 BC Code, s. 77. 2 8 8 BC Code, s. 79. 55 These procedures, together w i t h others such as Last Offer V o t e s , 2 8 9 facilitate g o o d faith bargaining by p r o v i d i n g avenues for settlement that avoid the acrimony and conflict inherent i n e c o n o m i c sanctions. Such procedures can be extremely effective. F o r example, an experienced mediator can enhance the prospects o f a g o o d faith settlement by the use o f various techniques including reality checks, issue identification and contextualisation, caucusing, shuttle diplomacy and confidential discussions. T h e existence o f a number o f different dispute resolution procedures also has the added benefit o f a l l o w i n g the Associate Chair or the M i n i s t e r to select the process most l ikely to resolve a particular dispute. T h e B C C o d e also provides for " m e d / a r b " 2 9 0 in cases where a union and an employer are negotiating a first col lective agreement. This procedure is n o w set out in section 55 o f the B C C o d e , 2 9 1 and can be summarised as fol lows: 1. E i t h e r party to col lect ive negotiations may apply to the Assoc iate C h a i r o f the M e d i a t i o n D i v i s i o n for the appointment o f a mediator i f they have failed to bargain a first agreement and the employees have voted to strike. A mediator must be appointed w i t h i n five days and the parties must supply the mediator w i t h a list o f disputed issues and their positions i n respect o f those issues. 2. O n c e an application for first agreement mediation is made, the parties may not strike or lockout unti l such time as the Associate Chair directs that they may do so. 2 8 9 BC Code, s. 78. 2 9 0 A process that combines mediation and arbitration. 2 9 1 Section 55 was enacted in January 1993. Prior to that, first collective arbitration was governed by section 137.5 of the Industrial Relations Act 1979 (amended by the Industrial Relations Reform Act 1987), and before that, by section 70 of the Labour Code 1973 (enacted by the Labour Code of British Columbia Act 1973). Initially a remedial response to unfair labour practice claims, the first agreement procedure is now considerably broader in scope. For discussion on the history of the procedure in British Columbia and the current policy of the BC Board as regards section 55, see Yarrow Lodge, and infra notes 317-321. 56 3. I f an agreement cannot be secured w i t h i n 20 days o f the appointment o f the mediator, the mediator must recommend to the Associate Chair one or more o f the fo l lowing: . proposed terms and conditions for consideration by the parties; . the appointment o f a mediator-arbitrator to conclude an agreement ("med/arb"); . the referral o f the dispute to arbitration by a single arbitrator or a board; • a l lowing the parties to strike and lockout . 4. I f the mediator recommends terms o f settlement and they are not accepted by the parties, or i f a collective agreement is not concluded w i t h i n 2 0 days o f the submission o f the mediator 's report, the Associate Chair must direct one o f three methods for resolving the dispute: med/arb, arbitration, or a l lowing the parties to effect economic sanctions. I f the Associate Chair directs med/arb or arbitration, neither party may effect a strike or l o c k o u t . 2 9 2 This procedure provides considerable support for g o o d faith bargaining, for as P a u l W e i l e r has noted: T h e l a w needs to be concerned about a different first-contract history, one w h i c h poses a major threat to the integrity o f the statutory representation scheme. There are stubbornly anti-union employers w h o in spite o f the certification, refuse to accept the right o f their employees to engage in collective bargaining. T h e y simply decide to fight the battle on a different front, to go through the motions o f negotiations and to try to talk the union 's bargaining authority to an early d e m i s e . 2 9 3 Similar processes are utilised in seven other Canadian jurisdictions. See Canada Labour Code, R.S.C. 1985, s. 80; Man., Labour Relations Act, R.S.M. 1987, c. L 10, s. 87; Ont., Labour Relations Act, R.S.O. 1995, c. L. 2, s. 43; P.E.I., Labour Act, R.S.P.E.I. 1988, c. L - l , s. 22(2) to (6); Que., Labour Code, R.S.Q. c. C-27, s. 93.1 - 93.9; Sask., Trade Union Act, s. 26.5; Nfld., Labour Relations Act, R.S.N. 1990, c. L - l , s. 81 -83. 2 9 3 P. Weiler, Reconcilable Differences (Toronto, Carswell, 1980) at 50. See also J. Sexton, "First Contract Arbitration: A Canadian Invention" (1991) Lab.Arb.Y.B. 231; C. Backhouse, "The Fleck Strike: A Case Study in the Need For First Contract Arbitration" (1980) 18:4 Os.H.L.J. 495. 57 T h e B C C o d e promotes g o o d faith bargaining not only at the time o f contract formation, but also dur ing the tenure o f an agreement. It does so by prov id ing for dispute resolut ion procedures i n respect o f matters arising after settlement. F o r example, section 54 o f the C o d e provides, i n part: (1) I f an employer introduces or intends to introduce a measure, pol icy, practice or change that affects the terms, conditions or security o f employment o f a significant number o f employees to w h o m the collective agreement applies, (a) the employer must give notice to the trade u n i o n that is party to the collective agreement at least 60 days before the date o n w h i c h the measure, pol icy , practice or change is to be effected, and (b) after notice has been given, the employer and the trade union must meet, in g o o d faith, and endeavour to develop an adjustment plan ... , 2 9 4 A failure to comply w i t h section 54 w i l l ground an unfair labour practice c la im and may expose an employer to an award o f damages . 2 9 5 Final ly , g o o d faith bargaining receives considerable support f rom the remedial powers o f labour boards. A s noted, a failure to bargain in g o o d faith w i l l g r o u n d an unfair labour practice c la im w h i c h , i f successful, can result in wide ranging remedies. F o r example, a party in breach o f the duty can be ordered to attend meet ings , 2 9 6 pay the costs incurred by the aggrieved party in the course o f "bad faith" negot iat ions; 2 9 7 cease, and desist f rom, 2 Section 54 replaced the previous "technological change" provisions which existed in the former Labour Code, and which continue to exist in a number of other Canadian jurisdictions (see e.g., Canada Labour Code, R.S.C. 1985, c. L-2, s. 51-52; Man., Labour Relations Act, R.S.M. 1987, c. L 10, ss. 83-86). Interestingly, in the recent review of the BC Code, no submissions were received from employers regarding section 54, while those from unions tended to call for a strengthening of the procedure (by, for example, the introduction of arbitration where parties failed to agree on an adjustment plan). See Managing Change, at 22. 2 9 5 See e.g., D&W Warehousing Ltd (Re), [1997] B.C.L.R.B.D. No. 208 (B.C.); University of British Columbia and Faculty Club Society and CUPE, Locs. 116 & 2950 (1994), B.C.L.R.B. No. B371/94 (B.C.); Canada Safeway Ltd (Re), [1997] B.C.L.R.B.D. No. 75. 2 9 6 Kaycee Enterprises v. Industrial Wood & Allied Workers of Canada, Loc. 1-85, 96 C.L.L.C. 220-024 (B.C.L.R.B.). 297 Kaycee Enterprises, (ibid.); Kidd Brothers Produce Ltd, [1976] 2 C.L.R.B.R. 304 (B.C.L.R.B.). 58 certain c o n d u c t ; 2 9 8 remove f r o m the bargaining table a proposal previously presented in bad f a i t h ; 2 9 9 re-table a proposal previously w i t h d r a w n in bad f a i t h ; 3 0 0 table a contract that it w o u l d be w i l l i n g to execute; 3 0 1 disclose information pertinent to issues on the bargaining t a b l e ; 3 0 2 agree to a particular proposal that is guaranteed by law (such as the m i n i m u m union security c lause) ; 3 0 3 or execute an agreement reached as a result o f col lective b a r g a i n i n g . 3 0 4 Canadian labour boards have also, on occasion, ordered employers to pay their employees compensatory damages for the loss o f opportunity to negotiate a collective agreement, where that loss has resulted f rom the employer 's breach o f the duty to bargain in g o o d f a i t h . 3 0 5 This practice has been rare, presumably because labour boards do not w i s h to become embroi led i n assessing what parties w o u l d have agreed u p o n had they negotiated i n g o o d faith f r o m the outset (an necessary assessment in the calculation o f quantum). H o w e v e r , the B C B o a r d arguably has the power to grant relief o f this k i n d under section 133 o f the B C C o d e , 3 0 6 and one could envisage instances where compensatory damages 2 9 8 Glenwood Label and Box Manufacturing Ltd and Communication, Energy and Paperworkers Union of Canada, Loc. 226, [1996] B.C.L.R.B.D. No. 300. 2 9 9 CCH Canadian Limited, 74 C.L.L.C. 16,114 (O.L.R.B.). 3 0 0 Fotomat Canada Limited, [1981] Can. L.R.B.R. 381 (Ont.). 301 CJA General Workers Union, Loc. 1030 andMoorewoodIndustries, [1987] O.L.R.B.Rep. 92 (Ont.); Royal OakMinesIncv. Canada (Labour Relations Board) (1996), 133 D.L.R. (4th) 129 at 161 (S.C.C.). 3 0 2 See e.g., Westinghouse Canada Ltd, 80 C.L.L.C. 16,053 (O.L.R.B.). The prospect of being ordered to disclose financial information serves to deter employers from making false or unsustainable claims of financial hardship. 3 0 3 Kamloops News Inc. v.I.T.U. Loc. 226, [1981] 2 Can.L.R.B.R. 356 (B.C.). 3 0 4 See supra note 268. 3 0 5 See e.g., Radio Shack, [1980] 1 C.L.R.B.R. 99 (O.L.R.B.); affirmed (1980) 80 C.L.L.C. 14,017 (Div. Ct.); G. Adams, at 10-128. For discussion on damages being awarded against a union for loss of this kind, see Canada Cement Lafarge Ltd and U.C.I.G.W.I. andAnor, [1981] 1 Can.L.R.B.R. 236 (Ont.). 3 0 6 Section 133(l)(b) provides the BC Board with the power to order a person to "rectify a contravention of the Code"; while section 133(l)(d) permits the Board to make an order setting the monetary value of an injury or loss suffered by a person as a result of a contravention of the BC Code. 59 might be an effective remedy, particularly where a party has been guilty o f prolonged and flagrant breaches o f the duty to bargain i n g o o d f a i t h . 3 0 7 Tradit ional ly , it had been considered that labour boards lacked the jur isd ic t ion to impose entire agreements o n parties, except where there existed express statutory p o w e r to do so (such as in the case o f arbitrated first collective agreements) . 3 0 8 This v i e w was modif ied by Royal Oak Mines Inc v. Canada (Labour Relations Board)3,09 In this case, the Supreme C o u r t upheld a decision by the Canada L a b o u r Relations B o a r d to order the parties to agree o n a collective agreement w i t h i n a prescribed period or have one imposed through arbitration. H o w e v e r , in endorsing this remedy, the Supreme C o u r t emphasised the extreme circumstances involved in the case. The dispute had involved an extremely acr imonious 18 month strike; brawls and violence had been c o m m o n place on the picket l i n e ; 3 1 0 nine replacement employees had been murdered in an explosion (in respect o f w h i c h a striking w o r k e r was subsequently convicted); beatings, death threats and bomb threats were c o m m o n place; and the possibility o f imposing martial law had been considered by Y e l l o w k n i f e 3 1 1 and federal officials. G i v e n these extraordinary circumstances, an extraordinary remedy was held to be j u s t i f i e d . 3 1 2 A c c o r d i n g to C o r y J : The BC Board has indicated that damages for "loss of opportunity" to bargain could be awarded in an appropriate case. See Fletcher Challenge Canada Ltd and CEPU, Loc. 1092, [1997] B.C.L.R.B.D. No. 255. Although this decision was concerned with a breach of section 68 (the prohibition on engaging replacement workers during a strike), and not a general breach of the duty to bargain in good faith, arguably the statements of the Board in this case are cast in sufficiently broad terms to be of general application to other unfair labour practice claims. 3 0 8 See e.g., Re Canadian Union of Public Employees and Labour Relations Board (Novia Scotia) (1983), 1 D.L.R. (4th) 1 (S.C.C.) [the "Digby School Board' case]. 3 0 9 (1996), 133 D.L.R. (4th) 129; 96 C.L.L.C. 210-011; [1996] 1 S.C.R. 369 (S.C.C). 3 1 0 151 criminal charges were laid in respect of one day's violence alone, and over 40 strikers had been dismissed for their actions on the picket line. 3 1 1 The town in which the mine was located. 3 1 2 See e.g., Lamer CJC at 133; "[Exceptional and compelling reasons" will be required in order to justify this remedy." 60 In fashioning an order the board was obliged to take into account the l o n g violent and bitter history o f the dispute. M o r e o v e r , the facts o f this case are so extraordinary that, i f it were necessary, the board was justif ied in going to the limits o f its powers in imposing a r e m e d y . 3 1 3 C r i t i c a l i n the C o u r t ' s f inding was the impact o f the dispute o n the small and isolated community o f Y e l l o w k n i f e . T h e strike, and the resulting violence had, in effect, d iv ided the township. In C o r y J ' s opinion: T h e impact o f the dispute had extended w e l l beyond the company and the u n i o n involved. Therefore, the order had to take into account the very real publ ic interest i n resolving the dispute fairly yet e x p e d i t i o u s l y . 3 1 4 ... T h e remedy struck an appropriate balance between the publ ic interest and the interests o f the p a r t i e s . 3 1 5 W h i l e Royal Oak Mines admittedly represents an extreme il lustration, it nevertheless serves to highlight the w i d t h o f the B C B o a r d ' s p o w e r s . 3 1 6 Those powers serve both as an effective deterrent against bargaining conduct inconsistent w i t h the duty o f g o o d faith and as a source o f meaningful relief i n cases o f non-compliance. 2.3 Statements of Policy Issued by the B C Board T h e duty to bargain in g o o d faith acquires substance not only from supporting provis ions i n the B C C o d e , but also f r o m statements o f pol icy issued by the B C B o a r d . T h e B C 3 1 3 Supra note 309 at 154. The Supreme Court distinguished its previous decision in the Digby School Board case primarily on the basis that the remedial powers set out in the Canada Labour Code were held to be more extensive than those in the Nova Scotia legislation (the statute at issue in the earlier case). 3 1 4 Supra note 309 at 158. 3 1 5 Supra note 309 at 166. 3 1 6 Although the remedial powers of the BC Board as regards unfair labour practice claims (see BC Code, ss. 14 & 133) are not expressed in identical terms to those considered in Royal Oak Mines (Canada Labour Code, s. 99(2)), the BC Board's powers are arguably broad enough to permit it to impose an agreement in extreme cases. For example, section 133(l)(a) of the BC Code provides, in part, that the BC Board may "order a person to do anything for the purposes of complying with the Code." [Emphasis added]. 61 B o a r d ' s decis ion in Yarrow Lodge is an illustrative e x a m p l e . 3 1 7 T h e B o a r d used the opportunity o f this dispute to set out in detail its pol icy as regards the first col lective agreement procedure set out in the B C C o d e . 3 1 8 Included in that pol icy were a number o f important g u i d e l i n e s : 3 1 9 1. T h e first contract procedure is not simply about bad faith conduct; it is to be used to repair a b r e a k d o w n in first contract negotiations, whether or not the conduct leading to the b r e a k d o w n constitutes a breach o f the duty to bargain in g o o d faith. 2. T h e appointment o f a mediator should occur in a timely fashion, so as to aid the parties i n bui ld ing a relationship and fostering a bargaining process. 3. W h e r e the parties are unable to conclude an agreement notwithstanding the assistance o f a mediator, the mediator shall identify the "stumbling b l o c k ( s ) " in his or her report, together w i t h a recommendation(s). Such reports are to constitute an important feature o f the p r o c e s s . 3 2 0 4. A r b i t r a t i o n is to be v iewed as an exceptional remedy; collective bargaining is to be v i e w e d as the preferred vehicle for achieving a collective agreement. 5. W h e r e an agreement is to be imposed through arbitration, it too should be imposed in a t imely fashion, so as to avoid an irreparable b r e a k d o w n i n the employment relationship. 6. W h e r e a collective agreement is imposed through arbitration, it ought not to include innovative or unusual c lauses . 3 2 1 T w o features o f this pol icy statement are o f particular significance. T h e first is its detail ( w h i c h has provided valuable guidance to employers, unions, mediators and arbitrators 317 Supra note 207. 3 1 8 BC Code, s. 55 (see supra notes 291-292). 3 1 9 Yarrow Lodge, at 28-33. 3 2 0 For discussion on the time restriction for the filing of a mediator's report, see Famous Players Inc. and Cineplex Odeon Corporation (B.C.L.R.B. No. B125/95) (B.C.). 3 2 1 See e.g., Nanaimo Youth Resource Centre (Wiseman House) v. HSA BC (1995), 48 L.A.C. (4th) 421 (B.C.). 62 alike). The second is the manner in which the policy was formulated. In addition to hearing from the parties involved in the case, the B C Board accepted submissions from more than 10 interveners, including the British Columbia Government, the Business Council o f B C and the B C Federation of Labour, thus ensuring it canvassed a wide range of views prior to the policy's formulation. The policy statement in Yarrow Lodge is but one example of the guidance the B C Board has provided on those aspects of the B C Code which impact upon the duty to bargain in good faith. Policy statements and information bulletins have been released on all manner of issues, including direct communications to employees during the bargaining process; 3 2 2 the first contract procedure, 3 2 3 the extent to which the Board will take into account the substance of a bargaining proposal when determining whether a party has failed to bargain in good faith; 3 2 4 the scope of the duty to bargain in good faith; 3 2 5 the procedures for the appointment of mediators, facilitators and fact-finders; and the content of the duty of fair representation. 3 2 9 The publication of these policies and guidelines is commendable. Not only do they provide guidance to employers and unions, they also foster consistency in mediation and arbitration proceedings. Perhaps most importantly, however, they illustrate a Cardinal Transportation. 3 2 3 Labour Relations Board of British Columbia, Information Bulletin No. 14: First Collective Agreements (Effective 4/1/1995). 324 Northwood Pulp & Timber Ltdv. CEP Loc 603 (1994), 23 C.L.R.B.R. (2d) 298 (B.C.). 3 2 5 Labour Relations Board of British Columbia, Information Bulletin No. 10: Duty to Bargain in Good Faith (Effective 4/1/1995). 3 2 6 Labour Relations Board of British Columbia, Information Bulletin No. 13: Mediator Officer and Services (Effective 4/1/1995); Labour Relations Board of British Columbia, Practice Guideline No. Mediator 2: The Appointment of a Mediator(s) in Essential Service Disputes (Effective 4/1/95). 3 2 7 Labour Relations Board of British Columbia, Practice Guideline No. Mediator 3: The Appointment of a Facilitator to Assist Parties in Developing a More Co-operative Relationship (Effective 4/1/95). 3 2 8 Labour Relations Board of British Columbia, Information Bulletin No. 15: Fact Finders (Effective 4/1/1995). 3 2 9 Labour Relations Board of British Columbia, Practice Guideline No. ADJ-3: The Duty of Fair Representation - What Does it Mean? (Effective 22/2/1994). 63 preparedness on the part o f the B C B o a r d to take a pro-active role in promot ing compliance w i t h the duty o f g o o d faith: a role w h i c h is far preferable to one o f simply imposing "after the event" sanctions in instances o f proven breach. 2.4 The Good Faith "Culture" W h i l s t it is necessary to l o o k to the B C C o d e and the B C B o a r d ' s statements o f pol icy as the source o f the duty to bargain i n g o o d faith in B r i t i s h C o l u m b i a , an assessment o f the duty w o u l d be incomplete without also considering the decisions o f the B C B o a r d , together w i t h those cases w h i c h have gone on to judic ia l review, and the statistics kept by the B C B o a r d o n the applications it receives. That is to say, it is also necessary to consider the extent to w h i c h the duty is being honoured by the parties rather than being enforced by the B C B o a r d and the courts. In carrying out this assessment, one notices something very significant. In recent times in B r i t i s h C o l u m b i a there have been very few cases involv ing claims that a party has failed to bargain in g o o d faith. Indeed, an assessment o f the statistics kept by the B C B o a r d (or its equivalent) over the last twenty years reveals a number o f interesting results. F irst , as noted i n Appendices one and t w o , 3 3 0 the number o f claims involv ing allegations that a party has failed to bargain in g o o d faith have been minimal in comparison to the overal l number o f unfair labour practice claims (9 .3%). M o r e o v e r , as A p p e n d i x three i l lustrates , 3 3 1 o f those claims w h i c h have involved allegations o f bad faith bargaining, 7 5 % have been settled voluntari ly between the parties, 15% have been dismissed, 2 . 5 % have been w i t h d r a w n , and i n only 7 . 5 % o f cases has the B C B o a r d (or its equivalent) ruled that a v io la t ion o f the duty has occurred. This statistic translates into an average o f less than three findings per year. Infra pages 216-217. Infra page 218. 64 T h e absence o f controversy surrounding the duty to bargain in g o o d faith is further evidenced by the statistics kept in relation to the first collective agreement procedure. O v e r the per iod f r o m 1973 (when section 70 o f the L a b o u r C o d e o f B r i t i s h C o l u m b i a A c t 1973 was enacted) to the beginning o f 1993 (when section 137.5 o f the Industrial Relat ions A c t 1979 was replaced by section 55 o f the B C C o d e ) , only 12 col lect ive agreements were imposed through a r b i t r a t i o n . 3 3 2 A n d , as is illustrated by A p p e n d i x f o u r , 3 3 3 f r o m the t ime section 55 was enacted unti l the end o f 1997, 8 0 % o f the 175 first agreement applications disposed o f were voluntari ly settled; 8 % were w i t h d r a w n , 4 % went on to strikes and lockouts , and just 5 .1% resulted in arbitration. A number o f conclusions can be drawn f rom these statistics. First , the duty to bargain in g o o d faith is an accepted component o f labour relations in B r i t i s h C o l u m b i a . 3 3 4 It is neither controversial or e x c e p t i o n a l . 3 3 5 A reading o f the decisions o f the B C B o a r d further reveals that where disputes have continued to arise, they have tended to be in respect o f smaller employers w h o have had little or no experience o f the duty nor dealings w i t h unions. F o r those employers w i t h a history o f union relations, compliance w i t h the duty to bargain in g o o d faith is n o w the expected, and effected, norm. Y e t , even where "first See the Annual Reports of the BC Board and the Industrial Relations Council of British Columbia (1974-1993). One of the primary reasons for the scarcity of imposed agreements was that under the 1973 Code a discretion vested in the Minister of Labour in respect of whether any dispute would be referred to the Labour Board. As it transpired, this discretion was seldom exercised. For a discussion on the operation of the procedure under the 1973 Code, see D. Cleveland, First Agreement Arbitration in British Columbia: 1974-1979 (Masters Thesis, University of British Columbia, 1982). 3 3 3 See infra page 219. 3 3 4 As it is in the other jurisdictions in Canada. For this reason, the duty cannot be said to suit the agenda of any one particular genus of political party. The duty is as accepted in Ontario (where the Progressive Conservative Government presently holds power) as it is in British Columbia (which is currently governed by the New Democrat Party). 3 3 5 It is notable that in the reviews of the BC Code (conducted in 1992 and 1998) neither employers nor unions called for the repeal of the duty to bargain in good faith. Set Managing Change; J. Baigent, et al., A Report to the Honourable Moe Sihota Minister of Labour. Recommendations for Labour Law Reform (Ministry of Labour and Consumer Services, September 1992). 65 t i m e " negotiations have encountered difficulties, the first contract procedure has resulted in an overwhelming level o f voluntary sett lement. 3 3 6 Secondly, the absence o f l it igation suggests that the standard o f conduct required by the duty has been adequately defined, largely by the B C B o a r d . Parties k n o w in advance what is expected o f them. T h e y can also recognise when their counterparts are acting in breach o f the required standards, and can challenge that conduct at the bargaining table. A n d thirdly, the mediation functions included in the enforcement mechanisms o f the duty appear to be w o r k i n g wel l . W h e n bargaining disputes do arise, mediators have been made available to assist the parties. A s the statistics referred to reveal, this has resulted i n the vast majority o f claims being resolved voluntari ly and without the need for l i t igation or arbitration. 2.5 Summary: Good Faith Bargaining and the BC Code T h e duty to bargain in g o o d faith in B r i t i s h C o l u m b i a derives m u c h o f its meaning f r o m the jurisprudence developed by the B C B o a r d . V a r i o u s obligations have been developed over t ime, the breach o f w h i c h w i l l support a c laim that a party has failed to bargain i n g o o d faith. H o w e v e r , it is impossible to appreciate the full affect o f the duty as it applies in B r i t i s h C o l u m b i a without canvassing the B C C o d e in its entirety. M u c h o f the content and effectiveness o f the duty stems f rom supporting provisions. V a r i o u s sections in the B C C o d e govern h o w the duty commences and operates. Others serve to facilitate g o o d faith by inhibit ing bad faith conduct, and by prov id ing procedures for dispute resolution. St i l l others govern the consequences o f breach. 3 3 6 Often it is a case of educating parties about a process with which they are unfamiliar. The experience in British Columbia has shown that initial and timely assistance from mediators can be extremely effective in facilitating bargaining. 66 M u c h o f the duty 's effectiveness has stemmed f rom the pragmatism o f the enforcement body, i n this case the B C B o a r d . General ly speaking, the duty has been developed i n B r i t i s h C o l u m b i a i n a practical fashion by B o a r d officials w h o appreciate the complexit ies and realities o f industrial bargaining. This pragmatism is evidenced by the B o a r d ' s wil l ingness to take a proactive stance through the formulation o f policies and guidelines. T h e result o f the B o a r d ' s efforts speak for themselves. T h e duty is not the subject o f significant levels o f l i t igation, and where unfair labour practice claims do arise, the vast majority are resolved through mediation and voluntary settlement. A s a final point, it is important to note that while the duty has encouraged g o o d faith bargaining, it has not eliminated industrial conflict in B r i t i s h C o l u m b i a . Quite clearly strikes and lockouts continue to o c c u r . 3 3 7 Y e t , as the statistics on the first col lective agreement procedure indicate, there w o u l d have been many more strikes and lockouts were it not for the duty and its supporting mechanisms. M o r e o v e r , the existence o f economic sanctions cannot be taken to mean that the duty is ineffective. Quite the contrary, a fundamental feature o f the duty is that parties ought to be able to strike and l o c k o u t prov ided they have first bargained in g o o d faith. W h a t the absence o f l i t igation over the duty indicates, is that parties in B r i t i s h C o l u m b i a are making every reasonable effort to secure agreement, and are doing so in g o o d faith, before resorting to economic sanctions. In sum, the duty to bargain i n g o o d faith has played, and continues to play, a very relevant and important role i n securing and promot ing industrial harmony in B r i t i s h C o l u m b i a . See infra page 179. 67 CHAPTER 3: IS LEGISLATIVE AMENDMENT NECESSARY IN NEW ZEALAND? B i l l B i r c h and M a x B r a d f o r d have said that a duty to bargain in g o o d faith is not needed in N e w Zealand employment and labour re la t ions . 3 3 8 They are supported i n this v i e w by the P u b l i c Service, w h i c h has stated that N e w Zealand law, and in particular, the E C A , already promotes g o o d faith b a r g a i n i n g . 3 3 9 O n e w a y to test these v iews is to consider the extent to w h i c h the existing law in N e w Zealand replicates the duty to bargain in g o o d faith, as it applies in B r i t i s h C o l u m b i a . 3.1 The Existing Provisions of the ECA Section 57: "Harsh and Oppressive " Behaviour Sect ion 57(1) o f the E C A provides: W h e r e any party to an employment contract alleges-(a) That the employment contract, or any part o f it, was procured by harsh and oppressive behaviour or by undue influence or by duress, or (b) That the employment contract, or any part o f it, was harsh and oppressive when it was entered into,-that party may apply to the C o u r t for an order under this section. W h e r e a party makes out a c laim under section 57(1), the E m p l o y m e n t C o u r t has the p o w e r to set aside an employment contract (either w h o l l y or in part) or to award compensation, or b o t h . 3 4 0 338 Supra notes 172-175. 3 3 9 Supra note 184. 3 4 0 ECA, s. 57(4). The Court does not, however, have the power to re-write a contract or impose terms of employment on the parties. See infra note 490. 68 T h e E C A does not define what is meant by "harsh and oppressive", "undue influence" or "duress", except to say that "the C o u r t shall have no jur isdict ion to set aside or modify, or grant rel ief i n respect o f any employment contract under the l a w relating to unfair or unconscionable b a r g a i n s . " 3 4 1 This section w o u l d appear to cover m u c h o f the ground that falls w i t h i n the scope o f a duty to bargain in g o o d faith, given that a considerable range o f bad faith conduct w o u l d arguably fall w i t h i n the plain meaning o f "harsh and oppressive", "undue influence" or "duress". Y e t , o n closer examination, it is apparent that section 57 has a number o f significant l imitations. T h e first is that section 57 has been held to apply only to concluded employment c o n t r a c t s . 3 4 2 T h e section cannot, then, be used in a proactive manner to initiate or guide negotiations, nor to require parties to persist w i t h bargaining i n a meaningful manner unt i l either a settlement or a genuine impasse is reached. T h e most an aggrieved party can do is seek a retrospective review o f bad faith conduct after they have acceded to another party 's demands. B y then m u c h o f the damage in terms o f conflict, the entrenchment o f v iews and oppression w i l l have occurred. M o r e o v e r , g iven this l imitation, it is difficult to envisage the available sanctions countering bad faith bargaining effectively. I f a contract is set aside, the parties are back to "square-one" - presumably further polarised as a result o f the l it igation - and without the benefit o f a mechanism w h i c h c o u l d then foster g o o d faith in any subsequent negotiations. Alternatively, i f compensation is awarded, an employer may w e l l v i e w this as a cost o f achieving its objectives, and its employees have no guarantee that such conduct w i l l not occur again. 3 4 1 ECA, s. 57(7). 3 4 2 For example, in United Food and Chemical Workers ofNZ and Ors v. Talley [1992] 3 ERNZ 423 (E.C.) [hereinafter "Talley"], a number of employees alleged that oppressive tactics were used by their employer to obtain a contract variation. Notwithstanding that the employer's conduct was held to be in breach of the section, those employees who refused to agree to the variation were denied relief. 69 T h e second l imitat ion o f the section is that it prohibits class a c t i o n s . 3 4 3 A n individual employee cannot, then, derive support f rom a collective action involv ing a number o f his or her colleagues. I f an employee is to challenge an employment contract under section 57, he or she w i l l , in most cases, be required to step forward as an individual plaintiff. 3 4 4 N o r can the E m p l o y m e n t C o u r t grant relief o f its o w n m o t i o n : 3 4 5 a party to the contract must apply for this re l ie f . 3 4 6 O n e might question h o w realistic these requirements are. It is arguably naive to expect an employee to take the witness stand, and describe h o w he or she has been oppressed by a manager, w h e n that employee k n o w s that immediately f o l l o w i n g the hearing he or she must, once again, w o r k under the supervision and control o f that manager. Ironically, those employees worst affected by this k i n d o f oppression (such as those without the support o f a strong union presence in the workplace) w i l l be those least l ikely to have the resolve to confront their employer in this m a n n e r . 3 4 7 T h e third, and most fundamental, l imitation inherent in section 57 is its scope, w h i c h has been restricted in a number o f respects. In the first place, the ambit o f section 57 is undermined by subsection 7, which , as noted, prohibits the granting o f rel ief on the basis 3 4 3 Adams v. Alliance Textiles [1992] 1 ERNZ 982 (E.C.) [hereinafter "Adams"] at 990; Talley, at 430. 3 4 4 While a bargaining representative can bring an action under section 57, this can only occur when the representative is a party to the contract, something which is occurring less and less under the ECA. 3 4 5 Such as in a case brought before the Court under another section of the ECA. 3 4 6 ECA, s. 57(3). 347 In Adams the Employment Court found it material in its decision to dismiss the claim under section 57 that the witnesses, while in the witness box, were not assertive in their criticism of their employer's conduct. The Court took this lack of outrage to indicate an absence of employer coercion. However, as the union's counsel has subsequently pointed out, a more plausible explanation is that the employees did not have the personal strength to publicly confront their employer. See "Interview with Robyn Haultain", noted in Dannin, supra note 33 at 477 (note 117). Interestingly, those same employees launched a nation-wide petition calling for the introduction of good faith bargaining (see H. Roth, "Chronicle" (1992) 17:2 N.Z.J.Ind.Rel. 247 at 257). 70 o f unfairness or unconscionabil ity. This restriction raises the threshold for intervention by the E m p l o y m e n t C o u r t beyond that w h i c h applies to all other contracts i n N e w Z e a l a n d . 3 4 9 Implied in this anomaly is the highly questionable assumption that all parties to all employment relationships ( including all employees) are less vulnerable to oppressive behaviour and exploitat ion than other kinds o f contracting parties, including indiv idual consumers. T h e ambit o f section 57 has been further narrowed by the E m p l o y m e n t C o u r t , w h i c h has chosen to merge together the apparently separate grounds for relief set out in sections 57( l ) (a) and 57( l ) (b) . A c c o r d i n g to the C o u r t in Adams: [T]here w i l l be few cases in w h i c h the C o u r t w i l l grant relief by reason o f harsh and oppressive behaviour, undue influence or duress unless the contract procured by these methods involves some substantive injury or detriment to the party subjected to such treatment . 3 5 0 This v i e w not only undermines the plain w o r d i n g o f the section, it also ignores the fact that particular negotiating conduct may fail to secure a contract that is sufficiently unbalanced to be v i e w e d as harsh and oppressive, but yet may still cause the aggrieved party considerable emotional distress, humil iat ion and financial outlay (in the f o r m o f paying for an advisor, for e x a m p l e ) . 3 5 1 Such damage ought to be compensatable irrespective o f the contractual outcome, yet under the C o u r t ' s v i e w o f section 57, it is not. 3 4 8 When the Employment Contracts Bill was debated in Parliament, a number of opposition Members of Parliament unsuccessfully lobbied for the exclusion of this restriction, and the express extension of the section to cover unfair and unconscionable contracts. See Hansard, Parliamentary Debates of New Zealand (1991) 30 April, 1600-1608. 3 4 9 Hughes, supra note 168, at 186. Consumer contracts, for example, can be set aside on the basis of unconscionability, yet the same relief is not available to employees and employers. Not only is the Employment Court prohibited from granting such relief (whether in a claim under section 57, or otherwise), the exclusive jurisdiction of the Employment Court likely prevents employers and employees from seeking relief of this kind elsewhere (although see Horn, para. EC 57.23). 3 5 0 Adams, at 1014. 351 Mazengarbs, at para. 57.5. 71 H o w e v e r , perhaps the most significant restriction on the scope o f section 57 stems f r o m the phi losophical underpinnings o f the E C A . A s noted, this legislation assumes equality o f bargaining p o w e r between an employer and an individual employee. A c c o r d i n g l y , the " n o r m a l " operation o f the employment relationship is not to be v iewed as harsh and oppressive. A s D a n n i n has noted: There is no reason to believe that Parliament was unaware o f the employee's normal dependence o n and subservience to the employer and the employer 's contro l o f the workplace . ... Parliament must also not have intended to define the normal employment relationship as il legal duress. A s a result o f what was the n o r m at the time the E C A was enacted, an employee has a heavy burden to prove i l legal c o e r c i o n . 3 5 2 This v i e w has been substantiated by decisions o f the E m p l o y m e n t C o u r t and the C o u r t o f A p p e a l , both o f w h i c h have stated that the employment relationship does not carry w i t h it any presumption o f undue inf luence . 3 5 3 T h e difficulties facing a claimant under section 57 were starkly demonstrated by the E m p l o y m e n t C o u r t ' s decision in Adams.354 In this case the employer sought to introduce a new col lect ive contract that reduced penal rates for overtime and night w o r k and phased out various existing entitlements, including long service leave. T h e proposed contract also 3 5 2 Dannin, Working Free, at 244-245. 3 5 3 Adams (E.C.) at 1031. This aspect of the Employment Court's decision in Adams was confirmed on appeal by the Court of Appeal. See Eketone (supra note 35) at 796. By way of comparison, the Canadian Supreme Court has taken the view that employment relationships (and their formation) typically involve unequal bargaining power. In Wallace v. United Grain Growers ((1998), 152 D.L.R. (4th) 1) the Supreme Court endorsed Swinton's comment that "the terms of the employment contract rarely result from an exercise of free bargaining power in the way that the paradigm commercial exchange between two traders does." (at 32). See also Slaight Communications v. Davidson, [1989] 1 S.C.R. 1038 (S.C.C), and W. Rayner, The Law of Collective Bargaining (Ontario, Carswell, 1995) at 2-2. Similarly, in the United States on America, the National Labor Relations Act is predicated on the view that "the inequality of bargaining power between employees who do not possess full freedom of association or actual liberty of contract, and employers who are organised in the corporate or other forms of ownership association substantially burdens and affects the flow of commerce ... by depressing the wage rates and purchasing power of wage earners... ." (See 29 U.S.C.S. s. 151, Findings and Declaration of Policy (West Supp.) at 270). 3 5 4 Supra note 343. 72 permitted the company to change all conditions o f employment at w i l l , vary an employee's starting t ime by up to sixteen hours a day, and to control individual pay rates unilaterally based o n the company 's o w n rating o f employees. N o t surprisingly, the u n i o n responsible for negotiating the previous award v igorously opposed these changes. A l l i a n c e responded by " i n v i t i n g " employees to attend meetings during w o r k t ime ( from w h i c h the u n i o n was e x c l u d e d ) , 3 5 5 whereupon it was suggested to staff that they revoke their u n i o n authorities and sign the proposed contract. M a n y w h o refused were subsequently denied overtime (which significantly reduced their take home pay). Af ter an extremely acr imonious dispute, the majority o f staff signed. T h e remainder were l o c k e d out. W h e n the company began signing staff directly to its new contract the union sought rel ief on behalf o f its members f r o m the E m p l o y m e n t Court . The u n i o n argued, in part, that the contract had been procured by harsh and oppressive behaviour. T h e E m p l o y m e n t C o u r t disagreed, stating that: T h e behaviour complained o f must strike the court as reprehensible, as moral ly b lameworthy and as meting out intolerable treatment. It w i l l normal ly have elements o f deliberation and o f unwarranted severity. Decept ive or misleading statements o f the k i n d alleged and aggressive marketing by strong personalities do not strike me as amounting to the behaviour described in the s u b s e c t i o n . 3 5 6 T h e E m p l o y m e n t C o u r t went on to say that while a lockout c o u l d possibly comprise duress and oppression i f it had the effect o f "finally bringing employees to their knees by virtual ly starving them into s u b m i s s i o n , " 3 5 7 that had not occurred in the present case. The plaintiffs' statement of claim alleged that the employees had been "invited" (i.e., directed) to attend these meetings. See Adams, at 1024. 3 5 6 Adams, at 1027. This interpretation of section 57 has subsequently been endorsed by the Court of Appeal. See United Food and Chemical Workers Union v. Talley [1993] 2 ERNZ 360 (CA.) at 378. 351 Adams, at 1029. 73 Since Adams there have been occasions where employees have successfully i n v o k e d section 5 7 . 3 5 8 Such results have, however, been few and far between, and have been notable for the severity o f the employers ' conduct. In Talley, for example, the employer prov ided its employees w i t h the choice o f either accepting a contractual variat ion ( w h i c h w o u l d have absolved the employer f r o m deducting union fees) or incurring a unilaterally imposed wage cut. This unlawful threat was effective in securing the variat ion, but was described by the C o u r t as amounting to "oppressive and tyrannical a r r o g a n c e " . 3 5 9 Similarly , in Marsh, the employer was held to have secured a replacement agreement by unlawful ly threatening to breach its employees' existing contracts o f employment. T h e suggestion that oppression bordering on starvation, or unlawful threats, w i l l be needed i n order for employees to successfully invoke section 57 illustrates the l imited scope o f the section. In short, then, although this section may have promised m u c h as regards the p r o m o t i o n o f g o o d faith bargaining, it has, in fact, delivered little. Section 12(2): Recognition of Bargaining Agents Section 12(2) o f the E C A provides: W h e r e any employee or employer has authorised a person, group, or organisation to represent the employee or employer i n negotiations for an employment contract, the employee or employer w i t h w h o m the negotiations are being undertaken shall, subject to section 11 o f this A c t , recognise the authority o f that person, group, or organisation to represent the employee or employer in those negot ia t ions . 3 6 0 3 5 8 See e.g., Talley; affirmed in United Food and Chemical Workers Union v. Talley [1993] 2 ERNZ 360 (C.A.); Craig v.R&P Fraser Pty Ltd and Waikato Beef Packers Ltd (1995) 4 NZELC 98,327; Marsh v. Transportation Auckland Corporation Ltd [1996] 2 ERNZ 266 (E.C.), affirmed, Transportation Auckland Corporation Ltdv. Marsh [1997] ERNZ 532 (C.A.). 3 5 9 Talley, at 456. 3 6 0 Emphasis added. 74 R e c o g n i t i o n o f a bargaining agent is fundamental to the duty to bargain in g o o d faith in B r i t i s h C o l u m b i a . 3 6 1 O n its face, then, the E C A w o u l d appear to already encompass a significant port ion o f the duty. A g a i n , however, appearances are misleading. W h i l e it is true that section 12 requires an employer to recognise an employee's bargaining agent, the section does not require the employer to negotiate w i t h that agent. T h e employer stil l retains the lawful right to refuse to bargain at all. Whether employees are able to persuade an employer to engage w i t h their agent w i l l depend on their bargaining strength, not o n section 12, for as the C o u r t o f A p p e a l has noted, section 12 has no role to play i f negotiations have not started: Sect ion 12(2) is predicated on the v i e w that negotiations for an employment contract are under way between the employer and the employees' authorised representat ive. 3 6 2 A c c o r d i n g l y , notwithstanding the existence o f section 12, the freedom o f employees to be represented i n negotiations can be over-ridden by employers w h o have the bargaining p o w e r to refuse to negotiate. This is somewhat ironic given that in 1990 the M i n i s t e r o f L a b o u r suggested in his drafting instructions for the E C A that the employee's choice o f bargaining agent ought to be subject to a p o w e r o f veto o n the employer 's p a r t . 3 6 3 A l t h o u g h this suggestion was considered too controversial to be adopted in the legislation, for many employees, this is exactly what occurs in p r a c t i c e . 3 6 4 W h a t is missing f r o m section 12 is any enforceable obligation to actually commence bargaining and to persist w i t h the process unti l either a settlement or a genuine impasse is 361 Supra notes 230-231, & 265-267. 3 6 2 Capital Coast Health v. NZ Med Lab Workers Union [1996] 1 NZLR 7 (CA.) at 19. Emphasis added. 3 6 3 Mazengarbs, at A/315. 3 6 4 C.f., the position in British Columbia, where the makeup of a counterpart's negotiating team cannot be used a reason to refuse to bargain. See supra note 217. 75 reached. T h e C o u r t o f A p p e a l has glossed over this deficiency, stating in a recent case that: Negot iat ions are ... a process o f mutual discussion and bargaining, i n v o l v i n g putting f o r w a r d and debating proposal and counterproposal , persisting, conceding, persuading, threatening, all w i t h the objective o f reaching what w i l l probably be a compromise that the parties are able to accept and live w i t h . 3 5 5 W h a t the C o u r t failed to acknowledge was that whether this process occurs as described depends not o n section 12, but solely o n the respective power and incl ination o f a particular employer and its employees. A n d , as Harbr idge and H i n c e have pointed out: G i v e n the current economic recession experienced in N e w Zealand, the p o w e r to decide whether or not to bargain rests almost exclusively w i t h the e m p l o y e r . 3 6 6 W h a t , then, does section 12 mean? Its operative'scope has, in fact, been l imited to the issue o f whether an employer can bargain directly w i t h its employees w h e n those employees have authorised a representative to bargain o n their behalf. W h i l s t this issue is easily stated, resolving it has proven to be considerably more difficult. F r o m an employee's perspective, the E m p l o y m e n t C o u r t ' s initial interpretation o f section 12 was far f r o m promising. In Adams, the C o u r t held that employees w h o had authorised a bargaining representative to negotiate on their behalf, could still be approached directly by their employer and persuaded to revoke those authorities and enter into direct negotiations. T h e C o u r t reasoned that by seeking the wi thdrawal o f those authorisations, the employer was, i n fact, recognising the authority o f the bargaining agent . 3 6 7 Capital Coast Health v. NZ Med Lab Workers Union [1996] 1 NZLR 7 (CA.) at 19. Harbridge & Hince, supra note 14. Adams, at 1024. 76 N o t surprisingly, the union appealed this decision to the C o u r t o f A p p e a l . A l t h o u g h the appeal was dismissed as moot sub nom, President C o o k e questioned the E m p l o y m e n t C o u r t ' s interpretation o f section 12: I am disposed to think that once a u n i o n has established its authority to represent certain employees ... then the employer fails to recognise the authority o f the u n i o n i f the employer attempts to negotiate directly w i t h those employees. T o go behind the union 's back does not seem consistent w i t h recognising its authority. T h e contrary argument advanced for the employer here is that authority can be recognised by trying to persuade the giver o f the authority to revoke it. That seems to me a rather cynical argument not necessarily in accordance w i t h the true intent, meaning and spirit o f the enactment. 3 6 8 Justice Gault also made an interesting comment regarding the relevance o f I L O conventions 87 and 98 to the interpretation o f section 12: A s w e made clear in Noort... it is appropriate to have reference to the terms of, and decisions upon, international instruments dealing w i t h fundamental rights w h e n interpreting the scope o f those rights under our ... legislation. ... It is not open to the C o u r t s to depart f r o m the plain meaning o f the statute but where it can be done ... the statute is to be given meaning consistent w i t h the freedom o f association as internationally r e c o g n i s e d . 3 6 9 Galvanised by these comments, the E m p l o y m e n t C o u r t set about interpreting section 12 w i t h a v i e w to ensuring that employee collectives were meaningfully recognised. This resulted in t w o promising decisions in New Zealand Medical Laboratory Workers Union Inc v. Capital Coast Health Ltd,310 and Ivamy v. New Zealand Fire Service Commission311 In Med Lab Workers, the employer, Capi ta l Coast Heal th , and the plaintiff union entered into negotiations for a new collective employment contract. Those negotiations were 3 6 8 Eketone, at 787. 3 6 9 Eketone, at 795. 3 7 0 [1994] .2 ERNZ 93 (E.C.) [hereinafter "MedLab Workers"]. 3 7 1 [1995] 1 ERNZ 729 (E.C.) [hereinafter "Ivamy"]. 11 unsuccessful. A s tensions grew, Capita l Coast H e a l t h sent to its staff various letters and memoranda personally attacking union officials and crit icising the u n i o n for delaying settlement. T h e employer also called a meeting directly w i t h staff to discuss its proposed collective contract. A l t h o u g h some staff refused to discuss this matter without their bargaining agent present, many were persuaded to attend. T h e union responded by seeking an injunction f rom the E m p l o y m e n t C o u r t . T h e u n i o n alleged that the employer was in breach o f section 12 by virtue o f its actions in bypassing and belitt l ing the union. T h e E m p l o y m e n t C o u r t agreed, and granted the injunction. A c c o r d i n g to the C o u r t , no less than seven letters and memorandum sent out by the employer were i n contravention o f section 12. A c c o r d i n g to the C h i e f Judge, those communicat ions "that had the effect o f undermining the authority o f the representative" were i n breach o f section 12, "regardless o f the employer 's m o t i v e " . 3 7 2 In Ivamy the F i r e Service C o m m i s s i o n attempted to negotiate a new collective contract w i t h its fire-fighters. Its proposals were met w i t h resistance by the fire-fighters' union. In an effort to advance its posit ion, the C o m m i s s i o n sent its employees an information pack consisting o f a revised proposal , the details o f w h i c h had not previously been given to the fire-fighters' union, and an offer o f a $4000 incentive payment for those employees w h o accepted the new proposal by a specified date. A l t h o u g h the C o m m i s s i o n ' s stated intention was to provide the union w i t h a copy o f the information pack at the same time the information was sent to the C o m m i s s i o n ' s employees, due to an administrative error the information pack was received by the fire-fighters w e l l before their union. In response, the u n i o n commenced an action under section 12, alleging the C o m m i s s i o n was attempting to negotiate directly w i t h its employees, and thus by-pass the union. O n c e again the E m p l o y m e n t C o u r t agreed w i t h the plaintiff. A c c o r d i n g to the C o u r t , the employer had acted deliberately so as to: Med Lab Workers, at 127-128. 78 [BJelittle the union, to reduce its importance and standing in the eyes o f its members and to prejudice its ability to represent them or to do so ef fect ively . 3 7 3 C h i e f Judge G o d d a r d further stated that: I f the employer had anything to say o n the subject o f the negotiations, at any rate by advocacy o f its terms, it should say it all to the representatives and none o f it to the e m p l o y e e s . 3 7 4 T h e rulings in Med Lab Workers and Ivamy signalled a significant advance f rom the posi t ion taken by the E m p l o y m e n t C o u r t in Adams, and appeared to inject a degree o f substance into section 12 by restricting the scope for employers to engage in bad faith and destructive bargaining t a c t i c s . 3 7 5 That substance was, however, short l ived. B o t h Med Lab Workers and Ivamy were overturned by the C o u r t o f A p p e a l . In the Med Lab Workers appeal, the C o u r t o f A p p e a l stated: Once [the negotiating] process is under w a y w i t h an authorised representative participating, the process may not be conducted directly w i t h any party so represented. [ H o w e v e r ] , the provis ion o f factual information [directly to employees] does not impinge on that p r o c e s s . 3 7 6 In Ivamy the decis ion o f the E m p l o y m e n t C o u r t was overturned by a majority o f three judges to t w o . A c c o r d i n g to the majority, the actions o f the C o m m i s s i o n in forwarding the information packs directly to its employees d id not breach section 12. I n reaching this conclusion, the C o u r t affirmed what it had said in the Med Lab Workers appeal, and went o n to state: 373 Ivamy, at 739. 374 Ivamy, at 764. 3 7 5 The conduct of the employers in Ivamy and Med Lab Workers would, had it occurred in British Columbia, have clearly contravened the duty to bargain in good faith. See supra notes 265-267. 3 7 6 Capital Coast Health v. NZ Medical Laboratory Workers Union [1996] 1 NZLR 1 (CA.) at 19. 79 T h e issue here is the construction and application o f the statutory obl igat ion imposed o n employers in s. 12(2). ... The provis ion o f factual information may w e l l occur in such manner as to be persuasive. Indeed seldom w i l l information be provided so as to be entirely free f rom any element o f persuasion, at least as to its veracity. Therefore it does not advance matters to test communicat ions solely by reference to whether it tends to persuade. W h a t are significant, i f there is attempted persuasion, are the subject matter and the target. W h o does it persuade and o f what? I f . . . there is persuasion o f employees to exclude the representative and enter into contracts direct w i t h the employer, then plainly it is persuasion o f a k i n d that is inconsistent w i t h the employer 's obligation under s 12(2). I f it is persuasion as to the reasonableness o f an employer 's stance on a particular issue w h i c h all parties understand is the subject o f negotiations between representatives, it need not amount to a failure to recognise an authority so as to contravene section 1 2 ( 2 ) . 3 7 7 O n the facts o f the case before it, the majority concluded: T a k e n as a whole and read objectively (and not w i t h regard to what combative recipients might want to read into them) the documents more appropriately fall w i t h i n factual statements as to the C o m m i s s i o n ' s posit ion in the negotiations than w i t h i n direct negotiations o f terms and conditions o f e m p l o y m e n t . 3 7 8 T h e fire-fighters' U n i o n was not impressed. N o r was Justice Thomas, w h o delivered one o f the t w o minori ty judgments. In his v iew, condoning the C o m m i s s i o n ' s conduct w o u l d : [Sjeriously reduce the effectiveness o f a bargaining agent to represent employees in negotiations for a collective contract [and] ... a l low a strategy o n the part o f the employer w h i c h is alien to both the letter and spirit o f s 1 2 ( 2 ) . 3 7 9 377 New Zealand Fire Service Commission v. Ivamy [1996] 2 NZLR 587 (CA.) at 599-600. 3 7 8 Ibid, at 602. The same approach was taken by the Court of Appeal in its decision in Airways Corporation of New Zealand v. New Zealand Airline Pilots Association IUOWInc [1996] 2 NZLR 622 (C.A.), which was released on the same day as its decision in Ivamy. In Airways Corporation, the employer solicited feedback directly from staff during negotiations about the employer's proposals -conduct which was held not to breach section 12. In contrast, conduct of this nature has been held to breach the duty to bargain in good faith in Canada. See e.g., CUPE and Canadian Broadcasting Corporation (1995) 27 C.L.R.B.R. (2d) 110 (Can.). 3 7 9 Ibid, at 603. 80 [I]t is not to be unexpected that employers and employees alike may conclude that col lect ive bargaining in the f o r m recognised i n the E m p l o y m e n t Contracts A c t is largely v i t i a t e d . 3 8 0 H o w e v e r , notwithstanding Thomas J ' s dissent, the C o u r t o f A p p e a l ' s rulings in the Ivamy and Med Lab Workers appeals represent the current state o f the l a w o n section 1 2 . 3 8 1 These cases represent a dramatic departure from the E m p l o y m e n t C o u r t ' s post-Adams interpretation o f the section, and o f the Appel late C o u r t ' s o w n comments i n Eketone. It was significant, for example, that the C o u r t o f A p p e a l made no mention in either appeal o f Gault J ' s comment i n Eketone that section 12 ought to be interpreted i n accordance w i t h the I L O ' s conventions o n freedom o f a s s o c i a t i o n . 3 8 2 Whatever the reason for this change in approach, the effect o f these decisions is clear. There are n o w any number o f ways in w h i c h employers can seek to undermine col lect ive bargaining (assuming, o f course that bargaining even c o m m e n c e s ) . 3 8 3 In the first place, a bargaining representative w i l l find it very difficult to co-ordinate a measured bargaining strategy, i f it has no w a y o f k n o w i n g what proposals have been, or w i l l be, sent directly to its members, and w h e n . 3 8 4 Secondly, it is one thing for union representatives and employers (or their representatives) to exchange disparaging remarks to one another across the bargaining table: it is quite Ibid, at 621. 3 8 1 Not surprisingly, the response to these decisions has been as polarised as the debate on the ECA itself. Contrast, for example, S. Moran, "Ivamy and Airways - The Implications for Employees" (1996) New Zealand Law Society Employment Law Conference Papers 163 (which is critical of these decisions) with D. Broadmore, "Airways - The Facts: Ivamy and Airways - The Implications for Employers" (1996) New Zealand Law Society Employment Law Conference Papers 169. 3 8 2 According to Gay and McLean, this judicial turn-around may have been politically motivated. They argue that the Court of Appeal may have taken the approach it did in Eketone because the final ILO report was pending, but that once that report had been released, the Court of Appeal restored the previous "free market" interpretation of section 12. See Gay & MacLean, supra note 73 at 59. 3 8 3 See e.g., the comments of Justice Thomas in New Zealand Fire Service Commission v. Ivamy [1996] 2 NZLR587 (CA.) at 620-621. 384 Cf., the position in British Columbia, where all negotiating proposals must be directed through the certified union, unless it agrees or acquiesces to proposals being sent directly to staff. See supra note 230. 81 another to expose employees to those comments without expecting at least some o f them to become disi l lusioned w i t h their decision to appoint a representative. 3 8 5 T h i r d l y , any direct communicat ions, whether disparaging or not, may w e l l serve to undermine the reputation o f representatives in the eyes o f their principals. A s L o r d C o o k e noted in his minority judgment in the Airways case , 3 8 6 direct communications necessarily carry w i t h them an insinuation that the representative cannot be trusted to convey information accurately to and f r o m its m e m b e r s . 3 8 7 Final ly , the distinction between permissible persuasion on the one hand, and unlawful direct negotiation on the other, is arguably meaningless. P r o v i d e d an employer expresses a wil l ingness to continue negotiations w i t h the representative, it can seek to influence the outcome o f those negotiations through direct communications w i t h its employees. Indeed, employers may w e l l consider it more profitable to spend greater time and resources o n direct communicat ions than o n bargaining w i t h a representative, g iven the potential for significant gains i n negotiations i f a representative's membership can be fragmented and undermined. In sum, section 12, as currently interpreted, contributes very little to g o o d faith conduct. One might say, in fact, that the C o u r t o f A p p e a l ' s interpretation o f section 12 encourages the very opposite. Section 64: Lawful Strikes and Lockouts In order to be lawful , a lockout must relate to "the negotiation o f a col lective employment •300 "ICQ contract ." I n Hawtin v. Skellerup Industrial Ltd, the plaintiff employees sought to 3 8 5 If for no other reason than the employer having the ability to simply ignore its employees stated wish that all bargaining communications should to be directed to their representative. 3 8 6 Supra note 378. 387 Supra note 378 at 626. 3 8 8 ECA, s. 64(l)(b). [Emphasis added]. 3 8 9 [1992] 2 ERNZ 500 (E.C). 82 argue that before they c o u l d be lawfully l o c k e d out, their employer had to have engaged in genuine negotiations. T h e E m p l o y m e n t C o u r t disagreed: [N]egotiat ion in a primary sense [means] 'conferring w i t h another w i t h a v i e w to compromise or agreement.' H a v i n g said that, however, I hold that such a process o f negotiation is not required as a prerequisite to a lawful lockout . ... T h e phrase, w i t h i n its particular context, 'relates to the negotiation o f a collective employment contract ' , enables an employer, I hold , to peremptori ly and without any pr ior process o f negotiations w i t h its affected w o r k force, ... present an otherwise lawful col lect ive employment contract to its particular employees and to uncompromis ingly insist that unless they accept the collective terms w i t h i n a prescribed time, they w i l l then be locked o u t . 3 9 0 This f inding served to eliminate yet another possible basis u p o n w h i c h an obl igat ion to bargain in g o o d faith in N e w Zealand labour relations might have been grounded. Sections 7, 8 and 28: Undue Influence, Preference and Dismissal in Relation to Union Membership, Involvement or Representation Sect ion 8(1) o f the E C A provides: (1) N o person shall exert undue influence, directly or indirectly, o n any other person w i t h intent to induce that other person-(a) to become or remain a member o f an employees organisation or a particular employees organisation; or (b) T o cease to be a member o f an employees organisation or a particular employees organisation; or (c) N o t to become a member o f an employees organisation or a particular employees organisation; or (d) In the case o f an individual w h o is authorised to act o n behalf o f employees, not to act o n their behalf or to cease to act on their behalf; or (e) O n account o f the fact that the other person is, or, as the case may be, is not a member o f an employees organisation or o f a particular employees organisation, to resign f rom or leave any e m p l o y m e n t . 3 9 1 Ibid, at 536. A bargaining strategy of this nature would clearly constitute boulwarism in British Columbia. See supra note 225. 3 9 1 Emphasis added. 83 Section 7 is o f similar effect, prohibit ing an employer f r o m conferring any preference (as regards hir ing or the terms o f employment offered) by reason o f an employee's membership or non-membership o f an employees organisation. L i k e w i s e , section 28 o f the E C A prohibits the discrimination o f an employee (defined as differential treatment or dismissal) by reason o f the employee's involvement in the affairs o f an employees organisation. "Involvement" is widely defined as including holding an office in the organisation or representing it or any employees in negotiations. O n e w o u l d expect these provisions to reduce bad faith and discriminatory conduct in labour bargaining. Y e t it is important to note that notwithstanding these sections, an employer remains free to pressure an employee to leave a union, so long as that pressure does not cross the line f r o m lawful persuasion to "undue" influence. T h e C o u r t o f A p p e a l has reinforced this distinction, by stating that employers are not required to be " u n i o n neutral": rather they are free, at any time, "to express v iews against u n i o n i s m " . 3 9 2 A d d i t i o n a l l y , these sections fail to address undue influence in respect o f an employee's decis ion to authorise his or her union to bargain o n his or her behal f . 3 9 3 This anomaly arises because the E C A creates a dichotomy between membership and representation; the latter is not treated as f lowing automatically f rom the f o r m e r . 3 9 4 A c c o r d i n g l y , up unti l the t ime o f authorisation, employers remain free to impress u p o n their employees (often i n captive settings) the 'dangers' o f authorising a particular, or any, bargaining representat ive. 3 9 5 Such 'persuasion' is not expressly covered by sections 7, 8 or 2 8 , 3 9 6 nor 3 9 2 Eketone, at 786. 3 9 3 Dannin, Working Free, at 202; Grills, supra note 26 at 92. 3 9 4 MP Jim Anderton unsuccessfully sought to introduce into the Employment Contracts Bill the notion that an individual's membership of a union would constitute prima facie evidence of the authority of the union to represent that individual. See Hansard, Parliamentary Debates of New Zealand (1991) 23 April, 1580. 3 9 5 E. Dannin, "Solidarity Forever? Unions and Bargaining Representation Under New Zealand's Employment Contracts Act" (1995) 18:1 Loy.L.A.Int. & Comp.L.J. 1 at 49-50. 84 is it prohibited b y s e c t i o n 12 w h i c h applies only once a representative has been authorised 397 to act in negotiations. T h e vulnerabil ity o f employees in this regard is heightened by the manner in w h i c h the E C A limits union access to the workplace. A l t h o u g h a union has a guaranteed right to enter a w o r k p l a c e to discuss the status o f negotiations w i t h those it represents , 3 9 8 access for the purpose o f securing new members and authorisations is at the sole discretion o f the e m p l o y e r . 3 9 9 O n c e again, then, employers are lawfully able to exercise a p o w e r o f veto. Some employers have used this p o w e r to a l l o w 'employer friendly' unions access to the workplace , whilst denying this privilege to other prospective representatives. 4 0 0 Others have been more aggressive, steadfastly refusing access to any unions. K e l s e y ' s description o f the N a t i o n a l Dis t r ibut ion U n i o n ' s experience illustrates the extent o f resistance unions have encountered: O n c e the [ E C A ] was passed, the ... N D U . . . m o v e d to secure benchmark contracts w i t h major employers, especially at the national company level. Some were co-operative. Others displayed a range o f tactics w h i c h became increasingly familiar: refusing to negotiate w i t h unions, preventing access, running anti-union campaigns, pressuring non-union members to sign contracts, threatening mass redundancy or loss o f investment, appointing consultation groups in w h i c h the 3 9 6 There is an argument that pressure of this kind could amount to indirect influence on a representative under section 8(l)(d). (See the obiter comments of Judge Goddard in Med Lab Workers, at 128, although the Judge's comments in that case were principally directed at pressure exerted on an employee after they had authorised a union to bargain on their behalf). 3 9 7 According to the ILO, the ECA gives insufficient protection against actions intended to interfere with an employee's decision to authorise a union to bargain on his or her behalf. See supra note 155 at 231. 3 9 8 ECA, s. 14. See also Foodstuffs (Auckland) Ltdv. N.D.U. [1995] 1 ERNZ 110 (C.A.). 3 9 9 ECA, s. 13. Cf, the broad rights of entry enjoyed by unions under the LRA (see supra note 16). In British Columbia, unions can, with the permission of the employer or the BC Board, access employees who reside on property controlled by an employer or a third party, for the purposes of recruitment (BC Code, s. 7(2)). Moreover, restraints on union activity (such as contract clauses prohibiting union activity on employer premises by employees during workbreaks) may also breach section 4(1) of the BC Code, which provides all employees with the freedom to participate in lawful union activities. See e.g., Cominco Ltd and CAIMAW[1981], 3 Can.L.R.B.R. 499 (B.C.). 4 0 0 In Adams, for example, (supra note 343) the employer created and funded the Mosgiel Independent Thought Society, and encouraged its employees to join. 85 u n i o n was only part, and encouraging the appointment o f w o r k p l a c e representatives to speak for all workers , w i t h unions representing only a f e w . 4 0 1 One further source o f bad faith conduct must be added to the N D U ' s already extensive list. U n d e r sections 12 and 59 o f the E C A , a bargaining representative (such as a union) must establish its representative authority for each separate act o f representation. A c c o r d i n g l y , a u n i o n is required to produce authorities for the renegotiation o f a contract that is about to expire. A s noted in respect o f the Department o f Socia l W e l f a r e , 4 0 2 this requirement has provided employers w i t h the opportunity to frustrate bargaining and deplete the resources o f unions, by imposing onerous evidential requirements as prerequisites to bargaining commencing. A s D a n n i n has pointed out: There has been little oversight to prevent employers f r o m m a k i n g the decis ion o n grounds other than g o o d faith doubt as to the w o r k e r s ' authorisation o f the 403 union. T h e actions described by the N D U , and those effected by the Department o f S o c i a l Welfare, can hardly be said to be w i t h i n the realm o f g o o d faith bargaining, yet none o f these actions are prohibited by sections 7, 8 or 28. Sections 19(4) and 43(a): No Unilateral Alteration of Terms of Employment A method by w h i c h employers can seek to exert bargaining pressure and undermine unions is through the unilateral alteration o f terms o f employment during the bargaining process. A s noted, this practice is prohibited for a specified period by section 45 o f the B C C o d e , a prov is ion that provides considerable support for the duty to bargain in g o o d faith in B r i t i s h C o l u m b i a . 4 0 1 Kelsey, supra note 57 at 265. Once again, many, if not all of these actions would constitute a breach of the duty to bargain in good faith in British Columbia. 4 0 2 Supra notes 124-125. 4 0 3 Dannin, Working Free, at 207. 86 The E C A w o u l d appear to provide similar, i f not more extensive, protection. Sect ion 43(a) states that employment contracts are to'"create enforceable rights and obl igat ions", whi le section 23 provides that any variat ion to a collective employment contract requires the agreement o f the parties affected by the variation. Sect ion 19(4) further provides that f o l l o w i n g the expiry o f a collective c o n t r a c t , 4 0 4 the employment relationship continues o n the same terms and conditions except that the collective contract is deemed to have been replaced by a series o f identical individual contracts (which can then be altered only by agreement) . 4 0 5 These provis ions suggest that unilateral changes to terms o f employment are prohibited at any t i m e . 4 0 6 This was certainly the v i e w taken by the E m p l o y m e n t C o u r t when employers argued that they had the right to alter terms o f employment provided the alteration enhanced their economic efficiency. In rejecting this argument the E m p l o y m e n t C o u r t stated: It is quite fallacious to regard some obligations under an employment contract (for example, to pay wages) as being important and others ... as being some w a y subsidiary and requiring to be complied w i t h only i f the party o n w h o m the obligation rests sees fit. The cardinal rule is that employment contracts create enforceable rights and obligations ... , 4 0 7 Y e t the n o t i o n that employment contracts create binding rights has proven vulnerable. F o r t w o and a hal f years employers managed to persuade the E m p l o y m e n t C o u r t that unilateral changes to terms o f employment could be lawfully imposed, provided they were referred to as "part ia l l o c k o u t s " . 4 0 8 This tenuous argument was first accepted by the 4 0 4 All collective employment contracts must specify an expiry date. (See ECA, s. 21). 4 0 5 NZ Residential Doctors Association v. Otago AHB [1991] 1 ERNZ 1206 (L.C.). 4 0 6 C.f., the position in British Columbia, where the terms of a collective agreement can be altered after the agreement and the "statutory freeze" period have both expired. See supra note 259. 407 N.L.G.O.U. V.Auckland City [1992] 1 ERNZ 1109 (E.C.) at 1127-1128. See also N.Z.P.S.A. v. Electricity Corp [1991] 2 ERNZ 365 (E.C.) at 379. 4 0 8 This was a practice whereby an employer would wait until an existing collective contract expired, and then unilaterally reduce wages or other entitlements whilst at the same time requiring its employees to turn up for work and perform their jobs in full. 87 E m p l o y m e n t C o u r t in Paul & NZ Community Services Union v. NZ Society for the Intellectually Handicapped409 a case in w h i c h the J H C imposed a 3 3 % reduction in the pay rates o f its employees by describing the imposed reduction as a lockout rather than a unilateral change to terms o f employment. It was not unti l June 1994 (two and a half years later) that the C o u r t changed its mind on this i s s u e . 4 1 0 In Witehira v. Presbyterian Support Services (Northern) 4 1 1 the F u l l C o u r t 4 1 2 held that partial lockouts were not lawful , stating: It cannot be the posit ion that the law al lows an employer, by resorting to a so called partial lockout , to free i tself f rom the obligation to pay wages whi le continuing to be entitled to receive the benefit o f w o r k . ... W e find it unthinkable that parliament ever intended that employers could w i t h h o l d wages without suffering any halt in p r o d u c t i o n . 4 1 3 Unfortunately , this judic ia l enlightenment arrived too late for those employees w h o had already signed o f f o n unilaterally imposed reductions to their terms o f employment, having believed there was no viable a l ternat ive . 4 1 4 4 0 9 [1992] 1 ERNZ 65 (E.C). 4 1 0 Legal challenges against partial lockouts during the intervening period were singularly unsuccessful. See e.g., Prendergast v. Associated Stevedores Ltd [1991] 2 ERNZ 728 (E.C); Petricevich v. Transportation Auckland Corporation Ltd [1992] 3 ERNZ 807 (E.C); Hawtin v. Skellerup Industrial Ltd [1992] 2 ERNZ 500 (E.C); Northern Distribution Union (Inc) v. 3 Guys Ltd [1992] ERNZ 903 (E.C); United Food and Chemical Workers Union of New Zealand v. Talley [1992] 3 ERNZ 423 (E.C). 4 1 1 [1994] 1 ERNZ 578 (E.C). 4 1 2 Which sits as a bench of two or three, whereas in the usual course Employment Court hearings are presided over by a single judge. 4 1 3 Supra note 411 at 592. This judicial turn-around is made all the more remarkable by the fact that one of the three judges sitting on the full bench in Witehira was the judge who decided the Paul case, and that the finding in Witehira was unanimous. The ruling in Witehira has since been endorsed by the Court of Appeal. See Transportation Auckland Corporation Ltd v. Marsh [1997] ERNZ 532 (C.A.). As a point of interest, the inclusive definition of a "lockout" in the BC Code clearly envisages a cessation of work. (See BC Code, s. 1). 4 1 4 Employees presented with a partial lockout prior to the ruling in Witehira had three options: accede to the demand; refuse and risk dismissal, or go on strike. For those employees without bargaining leverage and economic security, this was no choice at all. See Macfie, supra note 152. 88 W h a t is more, the decision in Witehira did not signal the end o f unilaterally imposed changes to terms o f employment. Some employers have simply continued to impose unilateral reductions despite the i l legality o f their a c t i o n s . 4 1 5 M a n y have avoided the censure because o f the economic vulnerability o f their e m p l o y e e s . 4 1 6 It has occurred to other employers to use the threat o f restructuring and redundancy to 'secure' new and less costly labour arrangements. The standard scenario involves an employer pleading financial hardship or insufficient profitability; requesting its w o r k f o r c e to agree either to a variat ion o f an existing collective agreement or to a less favourable renewal (depending on w h e n the demand is made); and advising its staff that i f this does not occur, the operation w i l l be closed d o w n , downsized or contracted o u t . 4 1 7 W h i l s t in theory any resulting changes are bilateral, the reality is frequently something different. In some instances, the threat is enough. Faced w i t h the prospect o f redundancy, employees have agreed to reduced entitlements. In other cases the threat has been carried out. A i r N e w Zealand, for example, closed d o w n its catering function at A u c k l a n d airport and brought i n contractors, resulting i n the dismissal o f 159 staf f . 4 1 8 M a n y o f the publ ic hospitals d id the s a m e . 4 1 9 Similarly, the Department o f Conservat ion used a department w i d e restructuring process to justify numerous redundancies. This type o f "wholesale" restructuring continues to be popular among N e w Zealand e m p l o y e r s . 4 2 0 F o r example, o n the 5th o f M a y 1998 the N e w Zealand F i r e Service announced that all o f its fire-fighters w o u l d be made redundant as o f the end o f July, and 4 1 5 Dannin, "We Can't Overcome", at 122 (note 684). 4 1 6 See e.g., the Minority Report, at 7. 4 1 7 A practise that was noted by the Employment Court without criticism in United Food and Chemical Workers Union ofNZ v. Talley [1992] 3 ERNZ 423 (E.C.) and Davis v. Ports of Auckland Ltd [1991] 3 ERNZ 475 (E.C). 4 1 8 See Unkovich v. Air New Zealand [1993] 1 ERNZ 526. According to Statistics New Zealand, there was a 22% increase in the use of contractors over the period from 1991 to 1996. (See Statistics New Zealand, Labour Market 96 (Wellington, Department of Statistics, 1997) at 123). 4 1 9 See e.g., the Minority Report, at 6. 4 2 0 See e.g., the Minority Report, at 10-12. 89 then invited to reapply for a significantly reduced number o f j o b s . 4 2 1 This announcement was apparently made without any prior consultation w i t h staff and their union, and its t iming i n the middle o f contract negotiations was far f r o m coincidental. It has since been rumoured that the N e w Zealand P o l i c e and the State Services C o m m i s s i o n (in respect o f all secondary school teachers) are considering taking the same a p p r o a c h . 4 2 2 A s the foregoing illustrates, the notion that the E C A prohibits the unilateral alteration o f employment contracts has been, and remains, largely i l lusory. A l t h o u g h variat ion requires agreement (at least since June 1994), i n reality the consequences o f employees not acceding to proposed changes is often dismissal. Such dismissal c o u l d be lawful (on the grounds o f a genuine redundancy), or unlawful , but for those without the resources to challenge an unlawful dismissal through the legal system, the legality o f their termination matters little. T o argue, then, that the protection w h i c h could be fostered by a duty o f g o o d faith bargaining is not required in N e w Zealand because there is no prospect o f unilaterally imposed changes to employees' contracts, is to ignore reality. It is, nonetheless, important to acknowledge that a duty to bargain i n g o o d faith w o u l d not prevent restructuring per se, nor should i t . 4 2 3 B u t what the duty can do is prevent employers making unsubstantiated threats o f contracting out simply as a means o f levering concessions f r o m staff. Threats o f contracting out w o u l d have to be substantiated w i t h explanatory material. T h e duty w o u l d also prevent employers f rom unilaterally deciding to contract out without first discussing this w i t h their staff and providing them w i t h an opportunity to consider 4 2 1 This proposal has now been challenged in the Employment Court. See M. Stevens, "Consultation Called a Sham" (1998) The Evening Post (N.Z.), 6 August, 9; D. Gee, "Sweeping Changes Anger Fire-fighters" (1998) The Press (N.Z.), 8 May; "Firemen Doubt Sackings Legal" (1998) The Press (N.Z.), 9 May. 4 2 2 S. Iosefa, "Teachers Fear Mass Sackings" (1998) The Press (N.Z.) 20 May; "Horror at Plans for Lay-offs in Police" (1998) The Press (N.Z.), 11 May. 4 2 3 See e.g., Starbucks Corporation, supra note 239. 90 their o w n bargaining stance. A s a consequence, this duty could w e l l serve to encourage the parties to w o r k towards an agreed resolution that al lows for the continuation o f employment, rather than the far more disruptive alternative. This w o u l d signify an improvement o n the present posit ion, w h i c h comprises numerous employers v i e w i n g wholesale restructuring as the "easy" option, when ultimately it may constitute a less than i 424 o p t i m u m result. Section 64(2)(c) - The Protection of Strikers - Dismissal and Replacement T h e E C A does not expressly address the issue o f whether str iking employees can be dismissed, although it provides in section 46(2)(c) that a lawfully striking employee cannot be sued for breach o f contract. T h e E m p l o y m e n t C o u r t has interpreted this p r o v i s i o n to mean that an employee w h o is lawfully on strike cannot be d i s m i s s e d . 4 2 5 H o w e v e r , the value o f this f inding is undermined in N e w Zealand, in t w o important respects. First , it can take months to process an unjustified dismissal c la im through the E m p l o y m e n t Tr ibunal . Thus, barring interim re l ie f , 4 2 6 an employee must face a considerable per iod o f uncertainty and, in many cases, unemployment. Secondly, unl ike the B C C o d e , the E C A permits the use o f outside replacement labour. E m p l o y e r s can, for example, l o c k out existing employees for as long as it takes to secure their agreement to a n e w and inferior employment contract, and hire replacement employees i n the interim. A c c o r d i n g l y , i f an employer 's demands are sufficiently extreme, there may be no practical difference between dismissing striking employees, and replacing them o n a " temporary" 4 2 4 See infra note 593. 4 2 5 Bickerstaffv. Healthcare Hawkes Bay Ltd [1996] 2 ERNZ 680 (E.C.) at 689. This interpretation over-rides the common law position that all striking employees can be dismissed. (See Miles v. Wakefield Metropolitan District Council [1987] AC 539 (H.L.)). 4 2 6 Which must be obtained in the Employment Court, and is, as a result, prohibitively expensive for many employees. 4 2 7 See supra note 123. 91 O n e might argue that the legality o f employers uti l ising replacement labour has nothing to d o w i t h g o o d , or bad, faith: that it simply relates to the legitimate options available to (and hence the bargaining p o w e r of) employers. Indeed, employers might argue that the right to use replacement labour is simply the equivalent o f employees obtaining alternative employment, or receiving financial support f rom their union, whi le s t r i k i n g . 4 2 8 Y e t , the difficulty w i t h this analysis is that it fails to address the manner in w h i c h some N e w Zealand employers have uti l ised replacement employees. It must be remembered that unl ike the posi t ion i n B r i t i s h C o l u m b i a , the right to engage replacements under the E C A does not co-exist w i t h a duty to bargain, let alone a duty to bargain in g o o d faith. Consequently, employers are able to appoint replacement workers as an alternative to bargaining at all , and as a means o f destroying u n i o n s . 4 2 9 In this context, then, the ability to use replacements cannot be described simply in terms o f a legitimate bargaining opt ion. It is, in fact, fundamental to whether bargaining occurs at all. A s a result, this entitlement serves to encourage destructive and intransigent tactics and reduces the l ike l ihood o f parties bargaining i n g o o d faith. Although it may be possible for striking employees to derive income in this manner, it must be noted that employees in New Zealand who are unemployed because they or their colleagues are on strike, are prohibited from collecting the unemployment benefit, except in extreme cases where a refundable special needs grant may be payable. See the Social Security Act 1964, s. 58; Mazengarbs, A/1430. The position in Canada is similar. A claimant who has lost his or her employment by reason of a work stoppage attributable to a labour dispute at his or her workplace is, save for limited exceptions, ineligible for the unemployment insurance benefit. See the Employment Insurance Act (S.Can 1996, c.23, s. 36). In Canada the objectives of this prohibition are said to be the preservation of government neutrality during labour disputes and the avoidance of the inequity of using an employer's contributions to the unemployment insurance fund to finance a strike against the employer. (See White v. R (1994), 94 C.L.L.C. 14,015 (sub nom, White v. Canada (1994) 111 D.L.R. (4th) 517 (CA.)) which was decided under the predecessor to section 36 - section 31 of the Unemployment Insurance Act, R.S.C. 1985, c-U. 1). For discussion on the operation of unemployment insurance benefits in Canada generally, see M. A. Hickling, Labour Disputes and Unemployment Insurance in Canada and England (Canada, CCH, 1975). 4 2 9 This contrasts with the position in British Columbia, where bargaining in good faith is a prerequisite to any lockout. See supra notes 250-251. 92 Dispute Resolution T h e E C A provides the E m p l o y m e n t Tribunal w i t h jur isdict ion to offer mediation assistance i n any matter where it deems its involvement w i l l improve or maintain an employment re la t ionship . 4 3 0 In theory, then, mediation is available in the context o f bargaining disputes. H o w e v e r , neither the E m p l o y m e n t C o u r t nor the E m p l o y m e n t Tr ibunal has jur isdict ion to compel parties to attend mediation. Thus, mediat ion w i l l not occur unless both parties agree. In most cases one or both o f the parties w i l l resist, preferring instead to utilise their bargaining power. A s a result, instances o f such assistance being sought are r a r e . 4 3 1 W i t h o u t legislative amendment, this reluctance to mediate is unl ikely to change. This is because the E C A encourages a party to maximise its o w n bargaining posit ion. It does this by setting few limits on the exercise o f bargaining p o w e r . 4 3 2 This approach is consistent w i t h the neo-classical economic theory that each party w i l l seek its o w n rational advantage. 4 3 3 A s D a n n i n notes: Judge Palmer [an E m p l o y m e n t C o u r t judge] has pointed out that the E C A al lows employers to negotiate contracts directly w i t h their employees; thus it contemplated each side w o u l d seek its o w n advantage. This means that the employer and employee must be prepared to use every w e a p o n available. T h e E C A offers nothing to protect parties i f they refuse to use the p o w e r they have or if, w h e n they use it, they are unsuccess fu l . 4 3 4 ECA, s. 78. See also C. Spell, "The Evolution of Rights Disputes and Grievance Procedures: A Comparison of New Zealand and the US" (1997) 28 Cal.West.Int.L.J. 199 at 202. 4 3 1 A study by McAndrew in 1992 revealed that only 3 out of the 557 employers who returned legible responses had sought the assistance a Tribunal mediator in a bargaining dispute. See McAndrew, supra note 30 at 176. 4 3 2 As noted, section 57 sets a high threshold for judicial intervention. Supra note 349. 4 3 3 S. O'Byrne, "Good Faith in Contractual Performance: Recent Developments" (1995) Can.Bar.Rev. 70 at 76; Gilson & Wagar, supra note 80 at 223-4; Kelsey, Rolling Back the State, at 348-349. 4 3 4 Dannin, Working Free, at 245. 93 Imposing a duty to bargain in g o o d faith w o u l d help counter this resistance to mediation. Attendance c o u l d not be v iewed as a sign o f weakness i f attendance was mandatory. M o r e o v e r , as was discussed in relation to the B C C o d e , the use o f a mediator i n a bargaining dispute can have numerous benefi ts . 4 3 5 Unfortunately, wi thout legislative amendment, those benefits w i l l continue to elude the majority o f N e w Zealand employers and employees. Section 104: Misrepresentations and Misleading and Deceptive Conduct R e l i e f may be available in circumstances where a party to an employment contract has procured that contract through misrepresentat ion, 4 3 6 or where a party has engaged i n misleading or deceptive c o n d u c t . 4 3 7 H o w e v e r , although these avenues w o u l d appear to provide redress for bad faith bargaining, in truth they are o f l imited value. In the first place, complete silence w i l l rarely amount to a misrepresentation. T h e jurisprudence o n misrepresentation cannot, then, be used as a basis for imposing a duty to disclose information pertinent to a particular b a r g a i n . 4 3 8 Secondly, although these provis ions prohibit certain conduct, they do not impose any positive duties (such as to bargain, to justify a proposal , to consider a counterproposal , and the like). A n d finally, as is the case i n respect o f section 57, these avenues act only in retrospect. O n l y after bad faith conduct Supra page 56. 4 3 6 ECA, s. 104(4) and the Contractual Remedies Act 1979 (although it remains unclear as to whether such claims fall within the jurisdiction of the Employment Court or the courts of ordinary jurisdiction. See Nitschev. Classic Air Ltd (Unreported, 13/6/1996, WEC 4A/96)). 4 3 7 Fair Trading Act 1986, ss. 9 & 12. Section 12 provides: "No person shall, in relation to employment that is, or is to be, or may be offered by that person, or any other person, engage in conduct that is misleading or deceptive, or is likely to mislead or deceive, as to the availability, nature, terms or conditions, or any other matter relating to that employment." 4 3 8 In the end result, New Zealand employers are under no obligation to supply financial information to employees in the course of bargaining (other than the employees' own wage records). See J. Brown, "Disclosure of Financial Information - Are New Zealand Employees and Unions Missing Out" (1996) 21:3 N.Z.J.Ind.Rel. 233; J. Brown, "Accounting to the Workforce" (1992) 17:2 N.Z.J.Ind.Rel. 207. In contrast, the duty to bargain in good faith in British Columbia compels disclosure of material information, both solicited and unsolicited. See supra note 226. 94 has occurred can a party seek to litigate. B y then, m u c h o f the damage w i l l have been done, for as A n d e r s o n has noted: [T]he costs and delays that are inevitably associated w i t h d r a w n out l i t igation are often fatal to organising and bargaining in i t ia t ives . 4 3 9 Section 18 and The Minimum Code A l t h o u g h section 18 o f the E C A provides that the content o f an employment contract is to be determined by negotiation, certain m i n i m u m employee entitlements are guaranteed by statute. F o r example, all employees over the age o f 20 are entitled to a m i n i m u m wage o f $7 per hour, whi le those between the ages o f 16 and 20 are entitled to an hourly m i n i m u m o f $ 4 . 2 0 . 4 4 0 E m p l o y e e s are also entitled to a m i n i m u m o f eleven publ ic holidays a year, fifteen days annual leave, five days annual sick leave, and a specified per iod o f parental l e a v e . 4 4 1 W h i l e an employer and an employee may agree to more favourable terms, in the absence o f agreement, or where a contract contains inferior terms, these statutory entitlements w i l l apply. This m i n i m u m code serves as a safety net. Some might argue this net renders superfluous a duty to bargain i n g o o d faith; that is to say, that such a duty is not necessary because all employees are protected f rom the purportedly excessive bargaining power o f employers. There are, however, t w o primary reasons for treating such an argument w i t h scepticism. First , it assumes that the m i n i m u m code delivers to all employees an acceptable standard 4 3 9 Anderson, supra note 141 at 134. The Adams litigation is a case in point. By the time the case reached the Court of Appeal, the contract in question had been replaced, and, as a result, the Court of Appeal dismissed the union's claim. 4 4 0 These levels were introduced in March 1997. See the Minimum Wage Act 1983 and the Minimum Wage Order 1997. See also "Adult Minimum Hourly Wage to Rise to $7" (1996) The Dominion (N.Z.), 3. According to the NZBRT, this protection should be abolished because it creates a barrier to employment. See J. Sloan, "Towards Full Employment in New Zealand: A Response to Employment: A Report of the Prime Ministerial Task Force on Employment (1994) at 28-33; Kelsey, New Zealand Experiment, at 195. 4 4 1 The Holidays Act 1981 and the Parental Leave and Employment Protection Act 1987. 95 o f l iv ing. It does not. In the first place, the m i n i m u m wage has no application to those under the age o f 16. T h e y must fend for themselves. This has resulted in the exploitat ion o f school children in part time positions o f e m p l o y m e n t , 4 4 2 and a resulting displacement o f existing employees i n favour o f this cheap source o f l a b o u r . 4 4 3 N o r do those aged between 16 and 17 escape vulnerability. Those i n this age bracket are n o w ineligible for the unemployment benef i t . 4 4 4 A s a result, those 16 and 17 year olds w h o have left school have no alternative but to accept whatever w o r k they can find, or go without. In terms o f the adult entitlement, it is important to note that rather than ensuring the m i n i m u m wage keeps pace w i t h inflation, the N e w Zealand Government has instituted c u t s . 4 4 5 T h i s is undoubtedly one o f the reasons w h y so many N e w Zealanders currently l ive b e l o w the poverty line. T h e second fallacy that underlies the m i n i m u m code is that it is necessarily adhered to. Those most desperate for employment are also those least l ikely to be able to insist on, or enforce, their lawful entitlements. I f a job is offered at b e l o w the m i n i m u m wage, insisting o n a lawful level o f pay w i l l , more often than not, mean that the applicant i n question w i l l be passed over. A n d then to seek to enforce one's entitlement after securing a j o b not only costs money, it also w i l l usually result i n dismissal at the hands o f a resentful employer. G i v e n these barriers to enforcement, it is remarkable that the E m p l o y m e n t T r i b u n a l heard over 300 arrears claims in 1996 a l o n e . 4 4 6 This statistic speaks volumes for employee vulnerabil ity when one considers that the vast majority o f arrears claims are unl ikely to be filed. 4 4 2 The National Distribution Union, for example, has identified cases of young workers being paid $1.50 and $2.00 per hour. National Distribution Union, Under Contract: A Brief Report on the Use of the ECA in the Retail Sector (Wellington, National Distribution Union, Undated) at 3. 4 4 3 A practice that is particularly prevalent in the shop sales industry. 4 4 4 As of 1 January 1998. See "Cuts to Teen Benefits Now In Force" (1998) One Network News, 1 January. See http://www.inl.co.nz. 4 4 5 Supra note 93. 4 4 6 New Zealand Department of Labour, Annual Report for the Year Ended June 30, 1996 (Wellington, Department of Labour, 1996). 96 A duty to bargain i n g o o d faith w i l l not stop all exploitation o f vulnerable employees. B u t that is not the point. T h e point is that there is little val idity to the c la im that a duty to p r o m o t e meaningful bargaining is not needed because all employees are already protected f r o m employer oppression by an adequate m i n i m u m c o d e . 4 4 7 3.2 The Employment Court and The Implied Obligation to Bargain in Good Faith S o o n after the E C A was enacted, unions sought to argue that the provisions in the A c t w h i c h dealt w i t h bargaining ought to be interpreted in accordance w i t h Canadian and A m e r i c a n authorities o n g o o d faith bargaining. In Adams, the C h i e f Judge rejected this argument, stating: U n d e r Canadian legislation there is some preoccupation w i t h bargaining in g o o d faith and all that that involves and a body o f rules has been built up one o f w h i c h , for example, distinguishes between surface bargaining and hard bargaining. N o such controls exist in N e w Zealand. The Canadian cases influenced by this consideration must be put to one s i d e . 4 4 8 U n i o n s responded by arguing that the duty to bargain i n g o o d faith was a component o f the impl ied term o f trust and confidence, w h i c h N e w Zealand courts had recognised i n cases such as Telecom South Limited v. Post Office Union: There is an implied term in every employment contract that . . . employers w i l l not, without reasonable and proper cause, conduct themselves in a manner calculated 4 4 7 There are, in addition, one or two other provisions in the ECA that could be viewed as promoting good faith conduct, at least at the periphery. Section 16 prohibits a party from resiling from a settlement reached between representatives until such time as the other party has had a reasonable opportunity to ratify. See NZ Engineering Union Inc v. Shell Todd Oil Services (NZ) Ltd [1994] 2 ERNZ 536 (E.C). Additionally, the ECA requires all contracts to contain procedures for resolving personal grievances and disputes of right, thus removing as a source of bargaining conflict the inclusion of such procedures in a contract. Yet, it is trite to say that these sections mean little without the fundamentals, namely a duty that requires parties to actually commence bargaining, explain proposals, respond to counter-proposals and persist until settlement or a genuine impasse is reached. 448 Adams, at 1019. 97 or l ikely to destroy or seriously damage the relationship o f confidence and trust between employer and e m p l o y e e . 4 4 9 Gradual ly the E m p l o y m e n t C o u r t has begun to accept this argument. T h e first indicat ion o f this acceptance emerged i n Unkovich v. Air New Zealand Ltd.450 In this case A i r N e w Zealand terminated negotiations for a new catering staff collective contract at A u c k l a n d airport, i n favour o f contracting out the services i n question. T h e u n i o n commenced a c la im i n the E m p l o y m e n t C o u r t alleging, inter alia, that the employer had effected this outsourcing in breach o f an implied obligation to bargain i n g o o d faith. In respect o f this submission, Judge C o l g a n stated: I think it can be safely said that the law o f employment i n this country recognises the existence o f mutual obligations o f trust and confidence between employers and employees. ... T h e scope and the content o f those obligations may be as variable as employment contracts are. ... E m p l o y m e n t contracts are significantly different f r o m other commercia l arrangements in part because collective employment contracts ... periodical ly expire but in circumstances in w h i c h it is presumed that the parties w i l l seek to continue the relationship . . . . A t such times the existing employment relationship continues as do, I think, the parties' obligations o f trust and confidence. The l a w al lows for hard bargaining, even the use o f coercive tactics w h i c h might appear to be the very antithesis o f trust and confidence in a subsisting relationship o f employment. B u t even w i t h i n that altered relationship during the period o f bargaining and negotiation, I w o u l d find that the underlying obligations o f trust and confidence w h i c h arise f r o m an existing and continuing relationship survive, albeit perhaps modif ied in some 4 4 9 [1992] 1 ERNZ 711 (CA.) at 715. See also Auckland Electric Power Boardv: Auckland Local Authorities IUOW [1994] 2 NZLR 415 at 419. For Employment Court authority to the same effect, see e.g., U.F.C. W. v. Talley [1992] 1 ERNZ 756 at 770. The Court of Appeal in Brighouse Ltdv. Bilderbeck [1995] 1 NZLR 158 expressed with confidence the view that Parliament must not have not intended the ECA to over-ride this implied term (first developed in New Zealand by industrial relations courts in the 1970s) or the Act would have expressly said so. Interestingly, the Canadian Supreme Court recently adopted a similar implied obligation (although more limited in scope) by holding that employers owe an implied obligation of good faith and fair dealing when effecting dismissals. See Wallace v. United Grain Growers (1998), 152 D.L.R. (4th) 1 (S.C.C). For discussion in Canada of the development of a duty of broader application, see G. England, "Recent Developments in the Law of the Employment Contract: Continuing Tension Between the Rights Paradigm and the Efficiency Paradigm" (1995) 20:2 QLJ 557. An implied obligation of mutual trust and confidence between an employer and an employee has also recently been recognised for the first time by the House of Lords. See Malik v. Bank of Credit and Commerce International SA (in liq), [1997] 3 WLR 95; 3 All ER 1 (H.L.). 4 5 0 [1993] 1 ERNZ 526 (E.C). 98 instances to take account o f the parties' conduct towards each other permitted by the l a w at the time o f b a r g a i n i n g . 4 5 1 O n the facts before the Court , Judge C o l g a n concluded that A i r N e w Zealand was in breach o f this obl igat ion o f trust and confidence: [I]n the course o f negotiations between the parties for a collective employment contract, the applicants' bargaining agents, the union officials, were to ld by the respondent that i f talks for collective employment contracts broke d o w n , indiv idual employment contracts w o u l d be entered into either w i t h individual employees or groups o f employees. In the event, however, the company either did not consider, or more probably belatedly considered and rejected, any prospect o f entering into such contracts. It did not, however, so inform the applicants or their bargaining agents o f its change o f heart or o f its wi thdrawal f rom the advice earlier given. It was ... the prerogative o f the respondent to ins is t . . . u p o n collective contracts for all o f its employees . . . . B u t having held out the prospect o f such alternative arrangements to the bargaining agents in negotiations, I consider the respondents duty b o u n d in fairness to have notified this important change o f tack to its employees to have a l lowed them a proper opportunity o f k n o w i n g of, and considering, the prospect o f contracting out and therefore redundancy i f a simple majority o f employees collectively continued to reject the company 's proposals. I w o u l d find the respondent's unannounced and belated retraction o f its offer to consider individual employment contracts to have been a material unfairness in all the circumstances o f the contract negotiations and the consequent and closely related d i s m i s s a l s . 4 5 2 O n the basis o f this f inding, among others, the redundancy dismissals effected by A i r N e w Zealand were held to be procedurally unjustified, and the plaintiffs were awarded compensation. 451 Ibid, at 589. Interestingly, the New Zealand Government drew these comments to the attention of the ILO, in the course of responding to the CTU's compliant regarding the ECA. See supra note 160 at 66. 4 5 2 Ibid, at 589-590. 99 T h e impl ied obl igat ion to bargain in g o o d faith was further developed by the E m p l o y m e n t C o u r t inRasch v. Wellington City Council™ In this case the employer was held to have unduly rushed negotiations thereby failing to a l low its staff sufficient time to consider whether they wished to be represented in negotiations, and i f so, by w h o m . T h e C o u r t was also crit ical o f the employer 's subsequent tactics in "running d o w n " the employees' tradit ional u n i o n representative i n communications sent directly to its employees. C h i e f Judge G o d d a r d concluded that the employer had breached both section 12 o f the E C A (by fai l ing to recognise the authority o f the representative) and the impl ied duty o f fairness: I doubt whether what was done is a legitimate tactic in negotiations w i t h employees. B r o w n & M a r r i o t t in ADR Principles & Practise ... refer to the E u r o p e a n doctrine o f culpa in contrahendo [meaning , roughly translated, "reprehensible conduct in negotiations"] w h i c h is apparently an extra-statutory concept o f g o o d faith and fair dealing developed by the E u r o p e a n Courts . W h i l e the boundaries o f the concept may be unclear, its application to a state o f affairs as that disclosed by this case w o u l d not be difficult to imagine under any civi l ised legal system. It cannot lie too far away f rom the duty imposed by the F a i r T r a d i n g A c t 1986 to desist f r o m misleading and deceptive conduct in business. In the present case the evidence discloses a serious abuse o f power and posit ion by the counci l , as w e l l as conduct that was decidedly tr icky. . . , 4 5 4 C h i e f Judge G o d d a r d next discussed this implied term i n Med Lab Workers. A s noted, the C h i e f Judge concluded that a number o f the communications sent by Capi ta l Coast H e a l t h to its employees were i n breach o f section 1 2 . 4 5 5 H e also held that those communicat ions were in breach o f the impl ied duty o f trust and confidence. In terms o f the scope o f that duty, and its relationship to g o o d faith, G o d d a r d C J stated: A w i d e range o f activities by both employers and employees in the course o f negotiations may also breach the mutual obligations to maintain confidence and trust between employer and employee. ... [T]his implied term w i l l require an employer and employee to negotiate in such a way that they do not contravene their mutual obligations in the continuing employment relationship. W e adopt, in [1994] 1 ERNZ 367 (E.C). Ibid, at 372. Supra note 372. 100 their entirety the sentiments expressed by C o l g a n J i n his judgment in Unkovich In deciding whether or not on the particular facts o f the case the conduct o f the party i n the negotiations has breached the mutual obligations, the question o f motive or the presence or absence o f g o o d faith may be decisive ... T h e mutual obligations may also be enhanced in situations, such as the present case, where the employer is b o u n d by statutory requirements to be a ' g o o d e m p l o y e r ' . 4 5 6 These v iews have been reiterated by the E m p l o y m e n t C o u r t in subsequent cases inc luding Ivamy451 NZ Engineering Union Inc v. Shell Todd Oil Services (NZ) Ltd45% Julian v. Air New Zealand Ltd,459 Caledonian Cleaners and Caterers (1992) Ltd v. Hetariki460 and New Zealand Medical Laboratory Workers Union Inc v. Hamilton Medical Laboratory Ltd.461 Perhaps the most definitive statement appeared in New Zealand Educational Institute v . State Services Commission 4 6 2 where the E m p l o y m e n t C o u r t stated that: There can be no doubting the existence o f a duty to bargain i n g o o d faith as between parties to an existing contract o f e m p l o y m e n t . 4 6 3 4 5 6 Med Lab Workers, at 129-130. The 'good employer' requirement applies to state employers and is imposed by various statutes. Employers in the state education sector, for example, are required by section 77 A of the State Sector Act 1988 to "operate a personnel policy that complies with the principle of being a good employer'. Capital Coast Health (the defendant in Med Lab Workers) was bound by an equivalent duty applicable to state health care providers. (See section 11 of the Health and Disability Services Act 1993). 457 Supra note 371 at 767. 458 Supra note 447 at 548. 4 5 9 [1994] 2 ERNZ 612. 4 6 0 [1994] 2 ERNZ 400. 4 6 1 (Unreported, AEC 102/97). In this case the union discovered after the contract had been accepted by its members (at a meeting called for that purpose) that it had omitted to cover rostering issues in the contract. The union then sought to argue that a formal ratification vote had not been held, and that accordingly, the contract was not binding. The Employment Court refused to allow the union to resile from the settlement, holding that to do so would be to allow the union to act in a manner inconsistent with the duty to bargain in good faith. 4 6 2 [1995] 2 ERNZ 339. 4 6 3 Ibid, at 349. Chief Judge Goddard has also suggested that an action might successfully lie injudicial review, where an employer, having embarked on negotiation, fails to do so in good faith. T. Goddard, "The Employment Court: Structure and Directions" (1996) 21:1 N.Z.J.Ind.Rel. 5, at 10. 101 T h e existence o f this impl ied duty to bargain in g o o d faith has also been accepted by the E m p l o y m e n t C o u r t i n the context o f the re-negotiation o f an individual employment contract. In Smith v. Radio i Ltd,464 the plaintiff argued that her employer had a duty to re-negotiate her contract in g o o d faith, and had breached that duty by raising stale complaints and irrelevant matters and by exaggerating the company's financial difficulties. A l t h o u g h the C o u r t held that the plaintiff had failed to substantiate these allegations, it nevertheless entertained the argument as a viable o n e . 4 6 5 T a k i n g these cases as a whole , f rom Unkovich to Radio i, one might argue that a fully operative duty to bargain i n g o o d faith already exists in the N e w Zealand employment and labour relations, and that accordingly, statutory amendment is unnecessary. 4 6 6 There are however, a number o f reasons w h y such an assertion cannot be made w i t h confidence. In the first place, the existence o f an implied duty to bargain in g o o d faith has never been upheld by the C o u r t o f A p p e a l . 4 6 7 T h e C o u r t o f A p p e a l had an excellent opportunity to approve o f this development i n the Med Lab Workers appeal, but chose not to do so. Instead the C o u r t o f A p p e a l stated: T h e [ E C A ] must be seen as essentially practical legislation designed to deal w i t h everyday practical situations. It is not appropriate to subject it to esoteric analysis or to d r a w fine distinctions i n its appl icat ions . 4 6 8 4 6 4 [1995] 1 ERNZ 281 (E.C). 4 6 5 See also Hearle v. Bay of Plenty Polytechnic Council (Unreported, AEC 62/96, 8 October 1996), where the Employment Court again accepted the existence of this implied term in the context of an individual employment contract, but dismissed the claim on its facts. 4 6 6 Rossiter, for example, suggests that there is little significant difference between the implied obligation to bargain in good faith which has been developed in New Zealand and the statutory duty which operates in Canada. See G. Rossiter, "Fairness in Employment Bargaining" (1998) NZLJ June, 224. 4 6 7 Whilst Justice Thomas appears to endorse the concept in New Zealand Fire Service Commission v. Ivamy [1996] 2 NZLR 587 (CA.) (at 619), he then goes on to state (at 619) that a lack of good faith is "a further relevant factor" in deciding whether section 12 has been breached. Thus, he does not go as far as endorsing an independent obligation to bargain in good faith. More importantly, however, Thomas J's decision was one of two minority judgments. Notably, the majority of the Court in the Ivamy appeal made no mention whatsoever of the implied obligation formulated by the Employment Court. 468 Capital Coast Health v. NZ Med Lab Workers Union [1996] 1 NZLR 7 (C.A.), at 18. 102 In relation to section 12 in particular, the C o u r t o f A p p e a l held that the section " s h o u l d be a l lowed to speak for i t s e l f ' . 4 6 9 T h e C o u r t made no mention o f an impl ied duty to bargain i n g o o d faith, nor o f Capi ta l Coast ' s statutory obligation to act as a ' g o o d employer ' . T h e failure o f the C o u r t o f A p p e a l to endorse this implied duty does not bode w e l l for the future o f the concept. N o r is the C o u r t o f A p p e a l ' s stance l ikely to change, at least i n the foreseeable future. T h e current appellant bench is without doubt more conservative and 'b lack letter' than the bench in place in the early 1 9 9 0 s . 4 7 0 This is due in no small part to recent changes i n personnel, particularly the retirement o f the President o f the C o u r t , L o r d C o o k e , and his replacement by Justice R i c h a r d s o n . 4 7 1 Justice R i c h a r d s o n has traditionally emphasised the importance o f contractual certainty, and appears to favour a unitarist v i e w o f e m p l o y m e n t . 4 7 2 F o r example, in a previous decision regarding implied obligations o f fairness i n the context o f redundancy, he expressed the v i e w that: In a contract o f employment workers and employers have mutual obligations o f confidence, trust and fair dealing. ... B u t those mutual obligations do not warrant the application o f any different principles to the implicat ion o f terms in col lect ive or individual employment contracts than are applicable to other contracts. ... In short, it is not open to the Courts to construct an extra-statutory concept o f social • .• 473 justice.. . . G. Anderson, "Interpretiting the Employment Contracts Act: Are the Courts Undermining the Act?" (1997) 28 Cal.West.Int.L.J. 117 at 139; Rasmussen & Deeks, supra note 61 at 294. 4 7 1 The president occupies a position of significant influence by virtue of his or her ability to influence the tenor of the court's decisions, and also to determine which judges sit on which cases. 4 7 2 Anderson, supra note 470 at 140. 473 Brighouse Ltd v. Bilderbeck [1995] 1 NZLR 158 (CA.) at 169. While these views were expressed in a minority judgment, they now reflect the state of the law, following a change of direction by the Court of Appeal, which was lead by President Richardson. See M. Stevens, "Mixed Reaction to Redundancy Law Reversal" (1998) The Evening Post (N.Z.), 18 May, 15; "Unionists Attack Redundancy Ruling" (1998) The Dominion (N.Z.), 16 May, 7. President Richardson's views in Bilderbeck can be contrasted with previous comments of President Cooke to the effect that the present day judiciary has replaced strict application of formal legal logic with the "search ... for the solution that seems fair and just after balancing all the relevant considerations." (See R. Cooke, "Dynamics of the Common Law" (1990) Commonwealth Law Conference - Conference Papers, at 1). 103 G i v e n these sentiments, and the recent stance taken by the C o u r t o f A p p e a l on implied t e r m s , 4 7 4 it is unl ikely that President Richardson w o u l d endorse the Unkovich line o f cases, particularly i f this were to result i n the imposi t ion o f bargaining obligations beyond those specified in the E C A . 4 7 5 T h e second fundamental difficulty w i t h the implied obligation as developed by the E m p l o y m e n t C o u r t is its l imited scope. The obl igation has never been used to force a party to commence, or persist w i t h , negot iat ions . 4 7 6 N o r is this l ikely to occur, g iven the f inding o f the C o u r t o f A p p e a l i n Eketone that an employer is under no obligation to negotiate w i t h anyone. In addition, the implied obligation applies only i n the context o f exist ing employment relationships where the parties are concerned w i t h the renewal o f their employment contract. The duty, as developed by the E m p l o y m e n t C o u r t , has no application whatsoever to the formation o f new employment relationships. Indeed, it can be fairly asserted that the implied obligation, as applied by the E m p l o y m e n t C o u r t to date, has added little, i f anything, to the existing (and unsatisfactory) provis ions o f the E C A . In Unkovich, Med Lab Workers, Ivamy, and Shell Todd, the existence o f the impl ied obl igation was referred to as a secondary ground for the C o u r t ' s decision. In each o f these cases, the employer was held to have also breached a prov is ion o f the E C A . It cannot, then, be said that the implied obligation has been used to break any new ground. A s A n d e r s o n has noted: It appears that once negotiations commence some g o o d faith obligations may arise . . . b u t that these obligations do not extend to receiving and considering proposals or to remaining in negotiations and making a g o o d faith attempt to reach an agreement. ... W h a t can be suggested is that the courts have n o w laid the 4 7 5 For example, the right to strike and lockout is lawful, subject only to the limitations expressed in the ECA (see supra note 38), one of which is not that the strike or lockout is preceded by genuine negotiations. If the Employment Court utilised the implied duty to impose genuine negotiations as a prerequisite to a strike or lockout, the Court of Appeal might well hold this to be an inappropriate fetter on the freedom to effect economic sanctions, as guaranteed by the ECA. 4 7 6 Horn, at EC 12.08. 104 foundation f r o m w h i c h they are free to develop a broad obl igation on employers, as w e l l as employees and their union, to negotiate and to do so i n g o o d faith. ... T h e major missing element is n o w the starting mechanism and the fuel to maintain i 477 the process. H o w e v e r , the reality is that the current E m p l o y m e n t C o u r t bench is unl ikely to attempt to expand u p o n the foundation to w h i c h A n d e r s o n refers. This is primari ly because in recent times the E m p l o y m e n t C o u r t has fielded severe crit ic ism, particularly f r o m the N Z B R T and the N Z E F , for perceived judicial activism™ A c c o r d i n g to R o g e r K e r r , for example, recent decisions o f the E m p l o y m e n t C o u r t have amounted to " a deliberate and conscious snub t o parl iament's intentions in passing the E m p l o y m e n t Contracts A c t " and have usurped " a pol icy m a k i n g role w h i c h should be the preserve o f democratical ly elected and accountable i n s t i t u t i o n s . " 4 7 9 Cri t ics o f the C o u r t have persistently called for its abolishment and for the integration o f employment and labour l a w into the jur isdict ion o f the ordinary courts, because, i n their v iew, the courts o f general jur isdict ion are less prone to judic ia l activism. This attack o n the E m p l o y m e n t C o u r t has been further fuelled by certain sectors o f the media. T h e f o l l o w i n g excerpt f r o m an editorial appearing in The Independent newspaper provides a representative example: 4 7 7 Anderson, supra note 141 at 124-128. 4 7 8 See e.g., R. Epstein, "Employment Law: Courts and Contracts" (Wellington, The New Zealand Business Roundtable, 1996), also published at (1997) 28 Cal. West. Int.J.L. 13; C. Baird, The Employment Contracts Act and Unjustified Dismissal: The Economics of an Unjust Employment Tax (Wellington, NZEF & NZBRT, 1996); B. Robertson, "The Arguments for a Specialist Employment Court in New Zealand" (1997) 21:1 N.Z.J.Ind.Rel. 34; Kerr, supra note 66. For views to the contrary, see e.g., T. Goddard, "Curial Institutions Under the Employment Contracts Act: 1991 to 1997" (1997) 28 Cal. West. Int.L.J. 103; Hughes, supra note 168; Anderson, supra note 470; M. Wilson, "Policy, Law and the Courts: An Analysis of Recent Employment Law Cases in New Zealand" (1995) 8 A.J.L.L'. 203; L. Skiffington, "The Role of Specialist Legal Institutions in Bargaining Under the Employment Contracts Act 1991: Saboteurs or Saviours?" (1996) 21:1 N.Z.J.Ind.Rel. 49. 4 7 9 R. Kerr, "Appeals to the Privy Council" (1995) New Zealand Bar Association, 22 July. 105 How the Employment Court Fosters Unemployment ... Thus the E m p l o y m e n t C o u r t can be seen as a major contributor to unemployment. This body, topped of f by chief judge T o m G o d d a r d , seems to be out to usurp the p o w e r o f Parliament. B y making its o w n law rather than interpreting and enforcing that enacted by our elected representatives, the E m p l o y m e n t C o u r t seems hell-bent o n becoming a law unto i tse l f . 4 8 0 N o t unexpectedly, this attack has begun to pay dividends for the N Z B R T and the N Z E F . T h e present M i n i s t e r o f L a b o u r , M a x B r a d f o r d (himself a former employee o f the N Z E F ) has commenced a review o f the E m p l o y m e n t C o u r t ' s performance. A c c o r d i n g to B r a d f o r d , the purpose o f the review is to determine: [Wjhether Parl iament 's intentions have been clearly expressed in the legislation. I f not, w e need to clarify it in order to narrow the opportunities for the j u d i c i a l act iv ism w e seem to be seeing i n the separate court jur isdict ion f r a m e w o r k . 4 8 1 Y e t even before the review is complete, B r a d f o r d himself has publ ic ly crit icised the E m p l o y m e n t C o u r t , stating; "[s]ome C o u r t decisions are clearly inconsistent w i t h the principles o f the [ E C A ] . " 4 8 2 The future o f the E m p l o y m e n t C o u r t has also been questioned by other leading Government Ministers . Recently the M i n i s t e r o f Finance (who happened to be the M i n i s t e r o f L a b o u r responsible for introducing the E C A into law) stated that: T h e t ime may have come to consider whether the industrial relations environment has changed since 1991, so that the E m p l o y m e n t C o u r t need no longer be separate. 4 8 3 4 8 0 (1994) The Independent (N.Z.), 16 December, 14. See also, NZPA, "Kerr Calls Judiciary to Account" (1998) The Evening Post (N.Z.), 20 June, 28; "The Judges who Chip Away at the Freedom of Employment Contracts" (1996) The Press (N.Z.), 23 May, 11; "Employment Court Judges Need to Fall into Line with Free Market" (1996) National Business Review (N.Z.), 19 January, 18; "Employment Contracts Act Undermined by Judicial Activism" (1993) The Independent (N.Z.), 14 May, 6. 4 8 1 Max Bradford, "Kiwis Cannot Relax" (1997) Address to the 1997 Government to Business Summit, Plaza International Hotel, 3 April. 4 8 2 R. Macfie, "Spring Clean or Major Renovation for ECA? (1997) MGF Business, 18 August, 4. See also G. Campbell, "The Max Factor: The New Labour Minister Wants a Tougher Employment Contracts Act" (1997) The Listener (N.Z.), 3 May, 24. 4 8 3 Address by W. Birch, Minister of Finance, to the Wellington District Law Society (1997) 7 June. 106 T h e latest statements by the N e w Zealand Government indicate that the future o f the C o u r t remains i n the balance. W i n s t o n Peters (then D e p u t y P r i m e M i n i s t e r and Treasurer), stated categorically i n the 1998 B u d g e t (delivered o n 14 M a y 1998) that the " G o v e r n m e n t . . . recognises the unique nature o f the employment relationship and is committed to maintaining a specialist E m p l o y m e n t C o u r t . " 4 8 4 Y e t , o n the very next day the P r i m e M i n i s t e r , Jenny Shipley, issued a press release to the contrary, stating that the future o f the E m p l o y m e n t C o u r t is indeed under r e v i e w . 4 8 5 G i v e n this pol i t ical uncertainty, it can be fairly suggested that the E m p l o y m e n t C o u r t is unl ikely to expand o n its conceptualisation o f the implied obl igation to bargain in g o o d faith, w h e n to do so w o u l d serve only to intensify the freemarketers' attack on the C o u r t ' s future. That expanding the duty w o u l d result in further cr i t ic ism is beyond doubt, for as D a n n i n has noted: T h e E C A is premised o n the v i e w that neither employer nor employee needs protection. In other words , creating implied covenants is at odds w i t h fundamental T - / - I A 486 E C A purposes. T h e third reservation that must be noted in respect o f the E m p l o y m e n t C o u r t ' s impl ied obl igation, even i f it, and the Court , were to survive, is its uncertainty. T h e C o u r t itself has been singularly unhelpful in defining the scope o f the obligation. In Med Lab Workers the C h i e f Judge stated that " a wide range o f activities by both employers and employees in the course o f negotiations may ... breach the mutual o b l i g a t i o n s " , 4 8 7 yet failed to specify what those activities might be. E q u a l l y unhelpful is Judge C o l g a n ' s statement in Unkovich "Working for a Better Future", Budget Speech delivered to Parliament by Hon. Winston Peters, 14 May 1998. See also "Peters Now Likely to Torpedo Court Move" (1998) The Dominion (N.Z.), 28 April, 1. 4 8 5 C. Bell, "Peters Backs off Employment Court Stand" (1998) The Dominion (N.Z.), 29 April, at 1. According to the Government's Industrial Relations Package, released in late July 1998, the review of the Employment Court will be completed later this year. See Bradford, supra note 175. 4 8 6 E. Dannin, "Consumating Market-Based Labor Law Reform in New Zealand: Context and Reconfiguration" (1996) 14:2 B.U.Int.L.J. 267 at 296. 487 Supra note 456. 107 that "the scope and the content of [these] obligations may be as variable as employment contracts". 4 8 8 N o r is there any clarity as to the remedies available in the event of breach. It is unlikely, for example, that the Employment Court would consider itself to have the jurisdiction to direct parties to attend mediation, or to impose terms on parties such as in the Royal Oak Mines case in Canada. 4 9 0 Uncertainty of this nature can only encourage costly and acrimonious litigation, the very thing the duty should be minimising. 3.3 Developments in The Common Law Generally as Regards Good Faith Bargaining There have been a number of recent developments in the common law which may conceivably provide impetus for courts in New Zealand implying into contracts generally a duty to bargain in good faith. 4 9 1 These are, respectively, the increasing number of cases in which courts have refused to condone bad faith conduct in negotiations; the possible re-classification of existing doctrines; the growing overlap between civil and common law principles, particularly in Europe; and the existence of opposition to the traditional rule that express agreements to negotiate in good faith are unenforceable. 4 8 8 Supra note 451. 4 8 9 It may be, for example, that section 57(7) of the ECA prohibits the Employment Court from invoking the duty where the bargaining process under challenge has resulted in an employment contract (given that section 57(7) prohibits the setting aside of a contract on the ground of unfairness or unconscionability -the very type of conduct the duty would normally ward against). 4 9 0 See, for example, the comments of Chief Judge Goddard to the effect that the Court does not have the jurisdiction to fix terms and conditions of employment. Goddard, supra note 478 at 105-106 (note 4). This accords with his finding in Adams that section 57 permits the Court to set aside a contract, but not to re-write or modify it. See Adams, at 998. 4 9 1 Whilst it is not suggested that employment contracts ought necessarily to be treated in an identical manner to commercial contracts (see for example, NZEI\. Shell [1994] 2 ERNZ 536 and Telecom South [1992] 1 ERNZ 711, where the Employment Court held that employment contracts are, at least in some respects, different to commercial contracts), trends in the common law generally may, nevertheless, influence developments in the specific field of employment law. 108 Cases Decided on the Basis of an Implied Obligation to Bargain in Good Faith T h e traditional posi t ion at c o m m o n l a w has been that negotiating parties do not o w e each other a duty to bargain in g o o d f a i t h . 4 9 2 Courts have applied this rule w h e n holding that a party is under no obl igation to disclose facts k n o w n only to them even although they are aware that disclosure w o u l d deter the other party f r o m concluding the c o n t r a c t . 4 9 3 A s A t i y a h has noted: E a c h party is entitled to make use o f what information he has in order to obtain the best bargain he can get; neither party is under any obligation to assist the o t h e r . 4 9 4 T h e pre-eminence afforded to self interest by the c o m m o n law in this context was affirmed by the H o u s e o f L o r d s i n Watford v. Miles495 a case involv ing failed negotiations for the sale o f a business. T h e plaintiff in this case (the proposed purchaser) sought to argue that the owner was in breach o f an implied obligation to negotiate in g o o d faith. L o r d A c k n e r (with w h o m the remainder o f the court agreed) rejected the argument, stating: [T]he concept o f a duty to carry o n negotiations i n g o o d faith is inherently repugnant to the adversarial posit ion o f the parties w h e n involved i n 496 negotiations. In recent times, however, there has been a perceptible movement away f rom this strict posit ion. There appears to be an increasing wil l ingness o n the part o f c o m m o n l a w courts to imply an obl igat ion o f g o o d faith into both the negotiation o f contracts and their 4 9 2 May & Butcher Ltd v. The King [1934] 2 K.B. 17 (H.L.); Interfoto Picture Library v. Stiletto Visual Programmes Ltd [1989] QB 433 (C.A.); J. O'Conner, Good Faith in English Law ( Aldershot, Dartmouth Pub., 1990) at 18. 4 9 3 See e.g., Smith v. Hughes (1871) L.R. 6 Q.B. 597. The exceptions to this general rule are limited in number and scope, and include contracts uberrimae fidei, contracts of guarantee and contracts of partnership. See P. Atiyah, An Introduction to the Law of Contract, 5th ed., (Oxford, Clarendon Press, 1995) at 255. 4 9 4 Ibid, at 247. 4 9 5 [1992] 2 A.C. 128. 4 9 6 Ibid, at 138. 109 performance. F o r example, recent Canadian cases involv ing tendering processes, real estate transactions, and the formation o f ongoing commercia l relationships have been decided i n an manner consistent w i t h an expanding duty o f g o o d f a i t h . 4 9 7 M o r e o v e r , the Supreme C o u r t i n Wallace v. United Grain Growers492, has expanded this development into labour and employment law, holding that employers must effect dismissals in accordance w i t h a c o m m o n l a w duty o f g o o d faith and fair dealing. Similarly , courts i n N e w Z e a l a n d , 4 9 9 A u s t r a l i a , 5 0 0 the U n i t e d K i n g d o m 5 0 1 and the U n i t e d S t a t e s 5 0 2 have s h o w n a will ingness to imply terms (or collateral agreements) requiring g o o d faith in the creation and performance o f contracts . 5 0 3 There has, i n addit ion, been 4 9 7 See e.g., Health Care Developers Inc v. Newfoundland (1996) 136 D.L.R. (4th) 609 (Nfld.C. A.); Opron Construction Co. v. Alberta (1994), 151 A.R. 241 (Q.B.); Mesa Operating Limited Partnership v'. Amoco Canada Resources Ltd (1994), 19 Alta.L.R. (3d) 38 (C. A.); Gateway Realty Ltd v. Arton Holdings Ltd (1991), 106 N.S.R. (2d) 180 (N.S.S.C.), affirmed (1992), 112 N.S.R. (2d) 180 (N.S.C.A.); Empress Towers Ltd\. Bank of Nova Scotia, [1991] 1 W.W.R. 537, 73 D.L.R. (4th) 400 (B.C.C.A.); Hirex Holdings Ltd v. Chrysler Canada Ltd (1991), 16 R.P.R. (2d) 154 (B.C.S.C.). Ward v. Cudmore (1986), 75 N.B.R. (2d) 112 (Q.B.); Greenbergv. Meffert (1985), 18 D.L.R. (4th) 548 (Ont.C.A.). See also S. O'Byrne, "Good Faith in Contractual Performance: Recent Developments" (1995) Can.Bar.Rev. 70. 4 9 8 See supra note 449. 4 9 9 See e.g., Gregory v. Rangitikei District Council [1995] 2 NZLR 208 (H.C) (a party considering tenders must do so in a genuine fashion); Artifakts Design Group Ltd v. N P Riggs Ltd [1993] 1 NZLR 196 (H.C.) (the defendant must use its best endeavours to promote the sale of the plaintiffs goods); Livingstone v. Roskilly [1992] 3 NZLR 230 (H.C.) (the parties to a contract must act in good faith in making and carrying out the contract); Devonport BC v. Robbins [1979] 1 NZLR 1 (CA.) (the parties to a contract are bound by an implied term requiring them to co-operate and not to hinder or impede the other party's performance). 5 0 0 Renand Construction Ply Ltd v. Minister for Public Works [1992] 26 NSWLR 234 (there exists in contracts a duty upon the parties requiring good faith performance); Hospital Products Ltd v. United States Surgical Corp (1984) 156 CLR 41 (Aus.H.C.) (the distributor is bound by an implied term requiring it to use its best endeavours to distribute the plaintiffs products); Secured Income Real Estate (Australia) Ltd v. St Martins's Investments Ply Ltd (1979) 144 CLR 596 (Aus.H.C.) (each party must do all such things as are necessary on its part to enable the other party to have the benefit of the contract). 501 GolbelfretNVy. Cyclades Shipping Co Ltd (The Linardos) [1994] 1 Lloyds Rep. 28 (notice to be given under a loading contract regarding the readiness of the receiving ship must be given in good faith); Downsview Ltdv. First City Corp. Ltd [1993] AC 295 (P.C.) (a mortgagee of property must exercise the power of sale in good faith); Blackpool and Flyde Aero Club v. Blackpool Borough Council [1990] 1 WLR 1195 at 1204 (the decision to reject a timely tender must be made in good faith). 5 0 2 Fortune v. National Cash Register, 373 Mass. 96, 364 N.E. 2d 1251 (1977); Kern v. Levolor Lorentzen, 899 F. 2d 772 (9th Cir. 1990) (dismissal at will must be effected in good faith). 5 0 3 For academic endorsement of this development, see e.g. R. Brownsword, "Good Faith in Contracts Revisited" (1996) 49 Cur.Leg.Probs. I l l ; T. Mills, "Letters of Intent and the Canadian Approach to Good Faith Bargaining Obligations: So Close, So Far" (1996) 11 B.F.L.R. 356; J. Cassels, "Good Faith 110 some discussion among commentators and courts about the development o f a duty to bargain in g o o d faith in tort and/or e q u i t y , 5 0 4 although most o f the recent c o m m o n l a w developments have occurred i n the context o f contractual doctrines. W h i l e the existence o f these decisions is undeniable, it is difficult to d r a w f r o m them a precise principle as to when a duty o f g o o d faith w i l l apply. O ' B y r n e , for e x a m p l e , 5 0 5 suggests that a duty o f g o o d faith import ing an obligation to "speak u p " may arise in cases i n v o l v i n g three factors: first, a pronounced information asymmetry between the parties; second, profoundly misleading silence because the existence o f the undisclosed information is consequential and unexpected; and third, a judic ia l focus o n equitable v a l u e s . 5 0 6 Beatson, o n the other hand, suggests that judges w i l l be crit ical o f n o n -disclosure i n cases where: It is either impossible for the other party to acquire the relevant information f r o m any source other than the counterparty to the contract either at all or wi thout incurr ing considerable expense. Alternatively, the relationship between the in Contract Bargaining: General Principles and Recent Developments" (1993) 15 A.Q. 56; Lord Steyn, "The Role of Good Faith and Fair Dealing in Contract Law: A Hair Shirt Philosophy?" (1991) Denning L.J. 131; G. Shell, "Opportunism and Trust in the Negotiation of Commercial Contracts: Toward a New Cause of Action" (1991) 44:2 Vand.L.Rev. 221; P. Finn, "Commerce, the Common Law and Morality" (1989) 17 MULR 87; B. Reiter, "Good Faith in Contracts" (1983) 17 Val.U.L.Rev. 705. For views to the contrary, see e.g., D. Goddard, "Long Term Contracts: A Law and Economics Perspective" [1997] N.Z.L.Rev. 423; S. Waddams, "Good Faith, Unconscionability and Reasonable Expectations" (1995) 9 JCL 55; P. Atiyah, An Introduction to the Law of Contract, 5th ed. (Oxford, Clarendon Press, 1995) at 255; E. Farnsworth, "Pre-contractual Liability and Preliminary Agreements: Fair Dealing and Failed Negotiations" (1987) 87 Columbia L.Rev. 217; M. Bridge, "Does Anglo-Canadian Contract Law Need a Doctrine of Good Faith" (1984) 9 Can.Bus.L.J. 385; P. Girard, "'Good Faith' in Contract Performance: Principle or Placebo" (1983) 5 Sup.C.L.Rev. 309. 5 0 4 See e.g., W. Powers, "Border Wars" (1994) 72:6 T.L.Rev. 1209; J. Flemming, "Insurer's Breach of Good Faith - A New Tort?" (1992) 108 L.Q.Rev. 357; R. Hawkins, "Lac and the Emerging Obligation to Bargain in Good Faith" (1990) 15 QLJ 65; J. Vickery, "A Special Relationship: The Use of the Duty of Good Faith and Fair Dealing to Impose Tort Damages in Contracts Between Lender and Borrower" (1990) 9 Rev. of L. 93; C. Lycoyannis, "Business Tort Remedies For Breach of the Implied Covenant of Good Faith and Fair Dealing" (1987) An.Suv. Am.L. 549; N. Cohen, "Pre-contractual Duties: Two Freedoms and the Contract to Negotiate" in J. Beatson & D. Friedmann, eds., Good Faith and Fault in Contract Law (Oxford, Clarendon Press, 1995) at 25. 5 0 5 S. O'Byrne, "Culpable Silence: Liability For Non-Disclosure In the Contractual Arena" (1998) 30 C.Bus.L.J. 239. 5 0 6 Ibid, at 241. I l l contracting parties is not a pure arm's length commercia l relationship but one o f trust and confidence or one o f dependence. 5 0 7 H a w k i n s proffers yet another four stage test for when standards o f g o o d faith conduct w i l l be a p p l i e d . 5 0 8 Against these formulations, other commentators suggest that categorising recent cases o f this nature according to only one principle or set o f principles may be i m p o s s i b l e . 5 0 9 Y e t , despite these classification difficulties, these cases illustrate a trend in favour o f imposing an obligation o f g o o d faith in the formation and performance o f contracts (particularly in long term relationship contracts, w h i c h many employment contracts are). G i v e n the reposit ioning o f N e w Zealand employment law squarely w i t h i n the realm o f contract, the E m p l o y m e n t C o u r t could l o o k to invoke this trend in support o f the impl ied obl igat ion to bargain i n g o o d faith w h i c h it has developed. The Re-Classification Debate There is also an emerging debate among commentators that existing contractual doctrines c o u l d be classified as falling wi thin one broad obligation; specifically an obligation to negotiate in g o o d faith. Carter and Furmston, for e x a m p l e , 5 1 0 argue that concepts such as certainty o f agreement, impl ied terms, promissory estoppel, restitution, and collateral contracts have all been used to promote standards o f g o o d faith in contract n e g o t i a t i o n s . 5 1 1 In their v iew, an argument can, accordingly, be made for the classification 5 0 7 J. Beatson, "Has the Common Law a Future" (1997) CLJ 291 at 305. 5 0 8 Hawkins suggests that courts will be prepared to invoke a duty to bargain in good faith where there is a serious relationship between the parties; the breakdown in bargaining was occasioned by the fault of one of the parties; the aggrieved party suffered damage as a result, and from which it could not protect itself; and the wronged party cannot reasonably be expected to bear the costs associated with the breakdown in the negotiations. See Hawkins, supra note 504 at 79-80. 5 0 9 See e.g., J. Carter & M. Furmston, "Good Faith and Fairness in the Negotiation of Contracts" (1995) 8:1 JCL 1; 8:2 JCL93 at 118. 5 1 0 Ibid, at 8. 511 Ibid, at 100-109. See also Hawkins, supra note 504 at 78; A. Guest, Chitty on Contracts, 27th ed. (London, Sweet & Maxwell, 1994) Vol. 1, at 13. 112 o f these doctrines under a general umbrel la o f " g o o d faith". M o r e o v e r , whilst E n g l i s h law has resisted the development o f an overall doctrine o f g o o d faith, as W a d d e m s points out, even in E n g l a n d g o o d faith has been an important factor in contract interpretation and in the development and application o f the doctrine o f u n c o n s c i o n a b i l i t y . 5 1 3 A l t h o u g h the creation o f one global doctrine o f g o o d faith is far f r o m universally s u p p o r t e d , 5 1 4 what is significant for present purposes is that this development may gain m o m e n t u m i f c o m m o n law courts continue to decide negotiation disputes o n the basis o f g o o d faith obligations. Should this occur, the E m p l o y m e n t C o u r t could l o o k to the c o m m o n l a w generally as authority for its o w n implied term. The Influence of the Civil Law A s Judge G o d d a r d noted i n Rasch v. Wellington City Council, a number o f c iv i l l a w jurisdict ions utilise the concept o f culpa in contrahendo, w h i c h , in effect, requires parties to negotiate i n g o o d f a i t h . 5 1 5 Similar obligations have been expressly incorporated into c iv i l codes and legislation i n countries such as Italy, Israeli, France, G e r m a n y and A r g e n t i n a and i n the Canadian province o f Q u e b e c . 5 1 6 5 1 2 Some support for this view can be derived from the series Laws of Australia, which now includes a volume (35) combining common law, equity and statutory provisions under the heading "Unfair Dealing". 5 1 3 S. Waddams, The Law of Contracts, 3rd ed., (Toronto, Canada Law Book Inc, 1993) at 339. See also Lord Steyn, supra note 503. 5 1 4 See supra note 503. 5 1 5 Such as Germany, Austria and Switzerland. See G. Kuhne, "Reliance, Promissory Estoppel and Culpa in Contrahendo: A Comparative Analysis" (1990) 10 Tel-Aviv. U.Stud.L. 279; F. Kessler & E. Fine, "Culpa in Contrahendo, Bargaining in Good Faith, and Freedom of Contract: A Comparative Study" (1964) 77 Harvard. L. Rev. 401. 5 1 6 Italian Civil Code, para. 1337; Argentine Civil Code, para. 1198; Code Civil (Fr.), art. 1134(3); Israeli Contracts (General Part) Law 1973, s. 12(a); German Civil Code (BGB), s. 242 & 157; Civil Code of Quebec, art. 1375. These provisions can be contrasted with instruments such as the Uniform Commercial Code and the Restatement (Second) Contracts in the United States, both of which require good faith performance of contracts but make no mention of good faith in negotiations. See, Uniform Commercial Code (US, 1990 Official Text), s. 1-203; Restatement (Second) Contracts (1981) s. 205 (although note the more limited duty of disclosure provided for in s. 161). For discussion on these later provisions, see E. Farnsworth, "Good Faith in Contract Performance" in J. Beatson & D. Friedmann, eds.,, Good Faith and 113 T h e c iv i l l a w concept o f g o o d faith in negotiations has permeated into various international instruments. F o r example, the U N I D R O I T Principles F o r International C o m m e r c i a l Contracts (1994) provides in A r t i c l e 1.7(1) that "[e]ach party must act in accordance w i t h g o o d faith and fair dealing i n international trade." A r t i c l e 2.15 further provides: (1) A party is free to negotiate and is not liable for failure to reach an agreement. (2) H o w e v e r , a party w h o negotiates or breaks o f f negotiations in bad faith is liable for the losses caused to the other party. (3) It is bad faith, in particular, for a party to enter into or continue negotiations w h e n intending not to reach agreement w i t h the other p a r t y . 5 1 7 Similarly , article 7(1) o f the U n i t e d Nat ions C o n v e n t i o n o n Contracts for the International Sale o f G o o d s 5 1 8 provides that " i n the interpretation o f the convention, regard is to be had to ... the observance o f g o o d faith i n international t r a d e . " 5 1 9 This convention has been adopted in numerous jurisdict ions, including B r i t i s h C o l u m b i a 5 2 0 and N e w Z e a l a n d . 5 2 1 A s parties increasingly structure their dealings in accordance w i t h principles o f this nature, standards o f g o o d faith may become an expected component o f a broad range o f n e g o t i a t i o n s . 5 2 2 S h o u l d this occur, courts w i l l no doubt be asked to give legal effect to those expectat ions . 5 2 3 Fault in Contract Law (Oxford, Clarendon Press, 1995) 153; R. Summers, "The General Duty of Good Faith - Its Recognition and Conceptualisation" (1982) 67:4 Cornell.L.Rev. 810. 5 1 7 For discussion on these principles, see P. Crepeau, The UNIDROIT Principles and the Civil Code of Quebec: Shared Values? (Scarborough, Carswell, 1998); J. Perillo, "Unidroit Principles of International Commercial Contracts: The Black Letter Text and a Review" (1994) 63:2 Ford.L.Rev. 281. 5 1 8 U.N. Doc. A/Conf. 97/18, Annex 1 (1980). 5 1 9 For discussion on this article, and its relevance to a duty to bargain in good faith, see J. Klein & C. Bachechi, "Precontractual Liability and the Duty of Good Faith Negotiations in International Transactions" (1994) 17:1 Hous.J.Int.L.l. 5 2 0 International Sale of Goods Act (R.S.B.C. 1996, c.236). 5 2 1 Sale of Goods (United Nations Convention) Act 1994. 5 2 2 Principles of good faith have also been incorporated into various consumer statutes such as those in a number of jurisdictions which regulate financial transaction between institutions and individual 114 T h e c iv i l law influence is also apparent in the E C Direct ive on U n f a i r Terms in C o n s u m e r C o n t r a c t s , 5 2 4 w h i c h expressly incorporates notions o f g o o d faith. Significantly, for present purposes, this Direct ive has n o w been adopted by the U n i t e d K i n g d o m . 5 2 5 Whi ls t one c o u l d argue that the adoption in c o m m o n law countries o f these c iv i l l a w concepts w i l l be restricted to the specific context i n w h i c h they arise (in this case consumer contracts), the more l ikely v i e w is that expressed by Beatson: T h e long term result is l ikely to be that the influence o f the c iv i l l a w concepts ( g o o d faith, significant imbalance) are l ikely to extend beyond the consumer transactions covered by the Direct ive and regulations and to percolate throughout our l a w o f c o n t r a c t . 5 2 6 A s s u m i n g B e a t s o n is correct, the 'merging ' o f c iv i l and c o m m o n l a w principles c o u l d provide further support for the development o f an obligation to bargain in g o o d faith in the N e w Zealand labour market. consumers (see e.g., J. Beatson, "Public Law Influences in Contract Law", in J. Beatson & D. Friedmann eds., Good Faith and Fault in Contract Law (Oxford, Clarendon Press, 1995) 264). The enactment of provisions of this nature can further influence the development of analogous common law concepts. See Beatson, supra note 507. 5 2 3 See for example Lord Steyn, "Contract Law: Fulfilling the Reasonable Expectations of Honest Men" (1997) 113 LQR 433 at 439. 5 2 4 93/13/EEC (Council Directive of 5 April 1993) O.J. 21 April 1993 L 95/29. 5 2 5 1994 S.I. No. 3159. 5 2 6 Beatson, supra note 507 at 292. See also H. Beale, "Legislative Control of Fairness: The Directive on Unfair Terms in Consumer Contracts" in J. Beatson & D. Friedmann eds., Good Faith and Fault in Contract Law (Oxford, Clarendon Press, 1995) at 231; H. Collins, "Good Faith in European Contract Law" (1994) 14 Ox.J.L.S. 229. For discussion on the interaction between the civil law in Quebec and the common law in the remainder of Canada, see e.g., P. Crepeau, The UNI DROIT Principles and the Civil Code of Quebec: Shared Values? (Scarborough, Carswell, 1998); A. Flemming, "Canadian Common Law and Civil Law: A Study in Convergence" (1997) 25:1 IntT Bus.L. 13; C. Gonthier, "Some Comments on the Common Law and the Civil Law in Canada: Influences, Parallel Developments and Borrowings" (1992) 21 Can.Bus.L.J. 323. 115 Express Agreements Recent developments i n relation to express agreements to negotiate in g o o d faith also warrant mention. T h e traditional v i e w has been that such agreements are unenforceable . 5 2 7 This v i e w was recently confirmed in Waif ord v. Miles,52* where L o r d A c k n e r held that notwithstanding the existence o f a bare agreement to negotiate, a party c o u l d w i t h d r a w f r o m negotiations for any reason at any t i m e . 5 2 9 In his v iew, any agreement w h i c h sought to restrict this freedom w o u l d be too uncertain to e n f o r c e . 5 3 0 W h a t is interesting is the academic cr i t ic ism that Walford has a t t racted , 5 3 1 and the existence o f cases and commentaries advocating a move away f r o m this strict v i e w . 5 3 2 A s Carter and F u r m s t o n argue: It is hard to feel that the H o u s e o f L o r d s produced really conclusive reasons w h y parties w h o w i s h to assume mutual obligations to negotiate in g o o d faith should be denied the court 's support in such a perfectly reasonable endeavour. It is suggested that there is no sufficient reason for the courts to refuse enforceability to 527 Courtney andFairbairn Ltdv. Tolaini Brothers (Hotels) Ltd [1975] 1 WLR 297 (C.A.); Mallozzi v. Carapelli SpA [1976] 1 Lloyds Rep. 407 (C.A.); Voest Alpine Intertrading GmbH v. Chevron Oil Co Ltd [1987] 2 Lloyd's Rep 547 (C.A.). 5 2 8 Supra note 495. 5 2 9 Supra note 495 at 138. 5 3 0 Supra note 495 at 138. Cf., Hillas & Co Ltdv. ArcosLtd (1932) 147 LT 503; 38 Com. Cas. 23 (H.L.). 5 3 1 See e.g., Lord Steyn, supra note 523; J. Paterson, "The Contract to Negotiate in Good Faith: Recognition and Enforcement" (1996) 10 JCL 120; H. Beale, "Commentary on 'Good Faith and Fairness in Failed Contract Negotiations'" (1995) 8:2 CLJ 120; E. McKendrick, "The Regulation of Long Term Contracts" in J. Beatson & D. Friedmann eds., Good Faith and Fault in Contract Law (Oxford, Clarendon Press, 1995) 305; R. Buckley, "Walford v. Miles: False Certainty About Uncertainty - An Australian Perspective" (1993) 6 JCL 58; I. Brown, "The Contract to Negotiate : A Thing Writ in Water?" [1992] JBL 211; J. Cumberbatch, "In Freedom's Cause: The Contract to Negotiate" (1992) 12 OJLS 587. 5 3 2 D. McLauchlan, "Rethinking Agreements to Agree" (1998) 18:1 N.Z.U.L.R. 77; V. Taylor, "Contracts with the Lot: Franchises, Good Faith and Contract Regulation" [1997] N.Z.L.Rev. 459; Goddard, supra note 503; E. Farnsworth, "Developments in Contract Law During the 1980's: The Top Ten" (1991) 41:1 C.West.L.Rev. 203; E. Farnsworth, "Pre-contractual Liability and Preliminary Agreements: Fair Dealing and Failed Negotiations" (1987) 87 Columbia L.Rev. 217 at 268. See also Coal Cliff Collierire PtyLtdv. Sijehama Pty Ltd (1991) 24 NSWLR 1; Hughes Bros Pty Ltd v. Trustees of the Romian Catholic Church for the Archdiocese of Sydney (1993) 31 NSWLR 91. 116 agreements to negotiate in g o o d faith. There may be specific cases in w h i c h a court cannot give effect to such a commitment, or where the damages are only nominal , but it is over simplistic to assume all cases are o f this k i n d . 5 3 3 G i v e n the reaction to Miles, it is at least conceivable that express agreements c o u l d g r o u n d a duty to bargain in g o o d faith in the N e w Zealand labour market. 3.4 Conclusion - The Existing Law It w o u l d be untrue to say that notions o f g o o d faith bargaining are entirely absent f r o m the law that presently governs employment and labour relations in N e w Zealand. Clearly , there are existing provisions in the E C A w h i c h deal w i t h some o f the issues that fall w i t h i n the scope o f this duty as it applies in B r i t i s h C o l u m b i a . M o r e o v e r , the E m p l o y m e n t C o u r t has i tself begun to develop an implied obligation to bargain in g o o d faith, w h i c h c o u l d gain m o m e n t u m f r o m recent developments at c o m m o n law. H o w e v e r , despite what B i l l B i r c h , M a x B r a d f o r d and the P u b l i c Service might believe, the existing provis ions i n the E C A barely scratch the surface. The E C A does not require bargaining, let alone in g o o d faith. There is no obligation to commence bargaining; no obl igat ion to justify one's posit ion or consider alternatives; no obligation to genuinely seek agreement; and no obligation to persist w i t h bargaining unti l a settlement or a genuine impasse is reached. This v o i d is rendered all the more significant given the recent stance o f the C o u r t o f A p p e a l . Rather than g iv ing substance to sections 8, 12 and 57 o f the E C A , the C o u r t has provided ample scope for employers to exercise powers o f veto and to engage i n dictatorial and unilateral conduct; conduct w h i c h is clearly foreign to the not ion o f g o o d faith. N o r are the statutory " g o o d employer" obligations applicable to public sector employers resulting i n g o o d faith bargaining practices. Publ ic sector employers are n o w under Carter & Furmston, supra note 509 at 115. 117 pressure (akin to their private sector counterparts) to produce profitable operations. This pressure is inevitably resulting in employers dictating to their staff, and effecting bargaining practices w h i c h are inconsistent w i t h notions o f g o o d f a i t h . 5 3 4 T o the extent that employees and their representatives can sue under section 57 o f the E C A , and for misrepresentation, misleading conduct and the l ike, such actions are retrospective, and costly i n every sense o f the w o r d . A s Rasmussen argues, l i t igation "is a cumbersome, drawn-out process w h i c h adds to the insecurity o f employers and employees and has significant costs for the parties involved and for ... society as a w h o l e . " 5 3 5 L i t i g a t i o n is no w a y to foster industrial harmony, co-operation and g o o d faith. N o r , for that matter, does dictation. In short, the existing statutory l a w in N e w Zealand is manifestly inadequate as regards fostering g o o d faith bargaining. N o r is the present c o m m o n l a w posi t ion any better. T h e impl ied obl igat ion developed by the E m p l o y m e n t C o u r t has yet to be extended beyond the scope o f the E C A , unsatisfactory as it is, nor is this l ikely to change in the foreseeable future. In terms o f the recent developments at c o m m o n l a w generally, it is important to note that those w h o support the introduct ion o f a duty to negotiate in g o o d faith are in the minority. It remains to be seen whether their v iews w i l l ever obtain prominence. Similarly, the merging o f c iv i l l a w concepts w i t h the c o m m o n law in the U n i t e d K i n g d o m is still at its formative stages, and could , in any event, be distinguished as unique to E u r o p e . A n d in terms o f the enforcement o f express agreements to negotiate, such advances are unl ikely to be o f significant impact, simply because those employees w h o are able to secure such agreements w i l l generally have sufficient bargaining p o w e r to ensure that genuine bargaining takes place i n any event. Conversely, the potential protect ion to be achieved Of which clear examples are the approach taken to bargaining by the Department of Social Welfare (see supra notes 124-125) and the New Zealand Fire Service Commission (see supra note 421). 5 3 5 Rasmussen & Deeks, supra note 61 at 282. 118 f r o m agreements o f this nature w i l l continue to elude those most vulnerable to employer dictation. It must also be pointed out that the existence o f these general c o m m o n l a w developments w i l l be o f little relevance to N e w Zealand employment and labour relations i f the E m p l o y m e n t C o u r t is not prepared to adopt them. One suspects the E m p l o y m e n t C o u r t w i l l be reticent to do so, lest it invite its o w n abolishment. It the final analysis, it is suggested that M r B i r c h , M r B r a d f o r d and the P u b l i c Service erred w h e n they inferred that an obligation to bargain in g o o d faith already operates i n N e w Zealand law. M o r e o v e r , it is further suggested that the only w a y in w h i c h a duty to bargain in g o o d faith, akin to that w h i c h applies in B r i t i s h C o l u m b i a , could be introduced effectively into N e w Zealand is by statutory amendment. T h e alternatives are as uncertain as they are unl ikely to occur. 119 CHAPTER 4: THE GOOD FAITH DEBATE IN NEW ZEALAND I f one were to assume that a duty to bargain in g o o d faith is largely absent f r o m the l a w in N e w Zealand as it currently applies to employment and labour relations, what, then, w o u l d it cost to introduce such a duty? In particular, what w o u l d it ' cost ' in terms o f reduced efficiency and freedom; efficiency and freedom being the t w o primary objectives o f the E C A ? A c c o r d i n g to the P u b l i c Service, these costs w o u l d be significant, but is this v i e w necessarily correct? M o r e o v e r , beyond issues o f efficiency and freedom, what further arguments c o u l d be made for, or against, introducing this duty? E a c h o f these issues w i l l be addressed in turn. 4.1 Efficiency and the Duty To Bargain in Good Faith Efficiency's Pre-eminent Status Under the ECA T h e primary objective o f the E C A , and the permissive bargaining regime it introduced, is the p r o m o t i o n o f " a n efficient labour m a r k e t " . 5 3 6 A c c o r d i n g to the E C A ' s supporters, the enactment o f legislation emphasising this objective represented a significant improvement o n the L R A . A s noted, the N Z B R T (amongst others) had argued that bargaining under the L R A was inherently inflexible and, as a result, inhibited the efficiency o f the labour m a r k e t . 5 3 7 A c c o r d i n g to B r o o k , an economist and pol icy analyst for the N Z B R T : A n increasing weight o f evidence bears witness to the failure o f this k i n d o f system. This failure is most often described in terms o f the inflexibility it generates across all aspects o f employment relationships - inflexibility i n labour costs, condit ions o f employment, w o r k practices, rules and regulations ( including taxation), training and mobi l i ty w i t h i n and between firms. ... T h e overal l effect is ECA, Long Title. Supra note 45. 120 that barriers are erected to the fruitful and co-operative use o f labour, at a high cost o f unemployment and underemployment . 5 3 8 T h e E C A was intended to remedy this inefficiency. B i l l B i r c h , the M i n i s t e r o f L a b o u r responsible for introducing the E C A , spoke o f "efficiency" obtained through " improvements" in w o r k i n g arrangements. 5 3 9 T h e N Z E F similarly referred to employers and employees w o r k i n g together to achieve focused and effective agreements designed to meet the specific needs o f particular w o r k s i tes . 5 4 0 G i v e n the emphasis placed o n efficiency by the E C A , it is important to consider h o w a duty to bargain i n g o o d faith w o u l d affect the present efficiency o f the N e w Zealand labour market. The Free Market Vision of "Conflict Free " Employment A duty to bargain in g o o d faith is essentially aimed at eliminating bad faith, and resulting conflict, f r o m labour negotiations. Proponents o f the free market w o u l d argue that this duty is unnecessary (and therefore inefficient) because, in their v iew, bad faith and conflict are not "natura l" incidents o f the employment relationship. A s D a n n i n describes, pr ior to the enactment o f the E C A , many o f the A c t ' s supporters: [PJortrayed a coercion-free w o r k p l a c e ; . . . [contending] that the natural state o f employment relations is a meeting o f equals, intrinsically imbued w i t h co-operat ion and fa irness . 5 4 1 B r o o k , for example, argued that a free market w o u l d foster mutual , rather than confl ict ing, interests: [T]he competit ive pressure to w h i c h firms are subjected in labour markets (as w e l l as i n capital and output markets) w i l l act to constrain the contractual options available to employers, and create pressures to develop employment relationships 5 3 8 P. Brook, Freedom at Work (Auckland, Oxford University Press, 1990) at ix. 5 3 9 Supra note 42. 5 4 0 Knowles, supra note 43. 5 4 1 Dannin, supra note 33 at 462. 121 that not only commence w i t h an expectation o f mutual benefit, but maintain the mutuality o f that benefit over t i m e . 5 4 2 T h e N Z B R T expressed a similar v iew: It is important to recognise that w i t h the abandonment o f the conflict-based model o f industrial relations in favour o f a concept o f free exchanges between employers and employees based on mutual interests, 'strikes ' and ' l o c k o u t s ' are l ikely to become obsolete notions ... , 5 4 3 N o t only have E C A supporters tended to dismiss employer/employee conflict as "unnatural" , they have also argued that previous conflict and communicat ion difficulties between employers and employees were due primarily to the interference o f unions. A c c o r d i n g to the N Z E F , " a union presence in the w o r k p l a c e has frequently hampered, rather than encouraged, the communicat ion p r o c e s s " , 5 4 4 a v i e w endorsed by A n n e K n o w l e s : [I]t is the ... f irmly held v i e w o f proponents o f the [Employment Contracts] b i l l that . . . divisions that have been created i n the w o r k p l a c e by outside constraints imposed by current legislation w i l l be removed, a l lowing the employer and employees at an enterprise to have full and open c o m m u n i c a t i o n . 5 4 5 Thus, E C A advocates heralded the new free market approach to bargaining as a means o f el iminating this unnecessary and avoidable source o f conflict. Indeed, according to many 5 4 2 Brook, supra n 538 at 141. 5 4 3 NZBRT, Submission to the Labour Select Committee on the Employment Contracts Bill (February, 1991) at 18-19. 5 4 4 NZEF, "Forward to the Past: The Labour Opposition's Industrial Relations Policy" (1993) 18:2 N.Z.J.Ind.Rel. 205 at 205. 5 4 5 A. Knowles, "Employment Contracts Bill: What's in it for the Workers?" (1991) Examiner (N.Z.), 24 April, 7. Comments of this nature reflect a philosophy which conflicts with the view held by many involved in organised labour. Employer advocates such as Knowles identify unions as "third parties" which are external to the employment relationship. Conversely, many unionists view unions and their members as one and the same (i.e., that a union is simply the collective embodiment of its members). See e.g., R. Freeman & J. Medoff, What Do Unions Do? (New York, Basic Books, 1984) at 8. 122 supporters o f the legislation, the E C A has achieved this goal. C a r r o l and T r e m e w a n argue that: T h e most beneficial consequence o f the [ E C A ] seems to be that managers are n o w obl iged to talk directly w i t h their staff, rather than conduct labour relations through distant agents, and they report that workers are responding p o s i t i v e l y . 5 4 6 R o g e r K e r r expressed a similar v i e w in 1997, procla iming the E C A had resulted in: [E]normous changes i n enterprise culture, i n particular far greater trust and co-operation i n workplaces , less disputation and more job s e c u r i t y . 5 4 7 In the same manner, the N Z E F has asserted that " i m p r o v e d w o r k p l a c e communicat ion and flexibility [has] been the [ E C A ' s ] most notable success" as "staff and management [are] n o w able to talk to each other in ways not possible under a confrontational s y s t e m . " 5 4 8 E v e n the previous N a t i o n a l Government subscribed to the v i e w that union el imination served to foster w o r k p l a c e harmony: T h e weight o f evidence received by the committee pointed to a distinct improvement in employer/employee relations under the E m p l o y m e n t Contracts A c t 1991, mainly because o f the removal o f third party involvement at the w o r k p l a c e where employees and management d id not want i t . 5 4 9 A s has been noted i n chapter one, however, the introduct ion o f the E C A (together w i t h its emphasis o n direct bargaining between employer(s) and employee(s)) d i d not eradicate conflict. In particular, employer dictation increased. H o w then, d id the freemarketers explain this inconsistency? They did so by labelling such dictation and conflict as Carroll & Tremewan, supra note 6 at 187. 5 4 7 R. Kerr, "Obstacles to Employment and Productivity Growth in New Zealand's Labour Market" (1997) Address delivered at the 11th Annual Industrial Relations Conference, New Zealand Institute of International Research. 5 4 8 NZEF, "Communications Improved by Contracts Act" (1992) The Press (N.Z.), December 17, 3. See also NZEF, supra note 545 at 205. 5 4 9 The Majority Report, at 19. 123 " a n o m a l o u s " behaviour that w o u l d be corrected by the market place. A s one E C A supporter asserted: T h e market w i l l ultimately protect workers f rom being exploited by employers. F i r m s w h i c h fail to pay market rates - that is, based o n what a w o r k e r is w o r t h w i t h regard to his or her skills and experience - w i l l lose w o r k e r s . 5 5 0 A m e r i c a n l a w professor R i c h a r d Epste in , whose w o r k had a major bearing o n the content o f the E C A , has also placed considerable stock in the self-policing ability o f the market: T h e employer w h o decides to act for bad reason or no reason at a l l . . . faces very powerful adverse economic consequences. I f co-workers perceive the dismissal as arbitrary, they w i l l take fresh stock o f their o w n prospects, for they can no longer be certain that their faithful performance w i l l ensure their security and advancement. T h e uncertain prospects created by arbitrary employer behaviour is functionally indistinguishable f rom a reduction in wages unilaterally imposed by the employer. A t the margin some workers w i l l l o o k elsewhere, and typical ly the best w o r k e r s w i l l have the greatest o p p o r t u n i t i e s . 5 5 1 T h e protect ion apparently afforded to employees by the flexibility o f the free market was a theme similarly adopted by D o u g l a s M y e r s , a member o f the N Z B R T and C h i e f E x e c u t i v e o f one o f the largest companies i n N e w Zealand, L i o n Nathan. A c c o r d i n g to M y e r s , " b y far the strongest protect ion for w o r k e r s is the ability for them to compete freely for jobs and for firms to compete freely for their s e r v i c e s . " 5 5 2 In sum, then, advocates o f the E C A promoted, and continue to promote, three fundamental v iews as regards labour bargaining. These are, respectively; that the "natura l" state o f the employment relationship does not involve bad faith, conflict and 5 5 0 D. Coddington, Turning Pain into Gain: The Plain Person's Guide to The Transformation of New Zealand 1984-1993 (Auckland, A. Taylor, 1993) at 172-173. 5 5 1 R. Epstein, "In Defence of the Contract at Will" (1984) 51 U. Chi. L.Rev 947 at 968. Whilst New Zealand does not presently recognise employment at will, a number of the proponents of the present free market are lobbying for the introduction of this concept. See infra note 816. 5 5 2 D. Myers, "Where to Now in Labour Relations?", Speech Delivered to the Managing Change in Industrial Relations Conference (31 July, 1990) at 8. 124 exploitat ion; that the conflict w h i c h occurred in the past was due to the interference o f unions and a misconceived statutory framework; and that any conflict and dictat ion for w h i c h employers are responsible, is anomalous, and w i l l be corrected by the market place. I f one were to accept these views, a duty to bargain in g o o d faith w o u l d be superfluous. M a n d a t o r y g o o d faith bargaining procedures and obligations w o u l d be unnecessary in a labour market based on mutual interests, g o o d faith dealings, co-operation, the free and full exchange o f information, labour mobil ity, and the absence o f industrial conflict. B u t does such a market exist i n N e w Zealand, and, more particularly, h o w accurate are the three v iews referred to? The Continuation of Conflict Under the ECA A n y not ion that employment under the E C A w o u l d be conflict free and universally co-operative was quickly dispelled by what occurred i n the market place. A s noted in chapter one, strikes and lockouts continue to a r i s e , 5 5 3 such that this particular manifestation o f conflict can hardly be described as " a n o m a l o u s " . 5 5 4 Less overt forms o f conflict such as absenteeism, reduced w o r k e r output, turnover, l o w morale and a reduct ion i n trust Supra notes 132. Suikes and lockouts are being used not only to secure new collective contracts, but also simply to compel parties to attend the bargaining table and commence negotiations. See e.g., Emergicare (Henderson) Ltd\. NZ Nurses Union [1991] 2 ERNZ 583; NZPSA v. Designpower NZ Ltd [1992] 1 ERNZ 669; Hawtin v. Skellerup International Ltd [1992] 2 ERNZ 500; TaranakiAHB v. NZ Nurses Union [1992] 3 ERNZ 330. See also S. Green, "Talks Would End Industrial Action" (1996) The Evening Post (N.Z.), 22 October, 5. 5 5 4 J. Hughes, "What Bill Birch Should Do To Repair Flaw in Act" (1992) The Press (N.Z.), June 2, 12. For examples of media reports of this type of conflict, see e.g., D. Barton, "Health Care Service Staff Set to Strike" (1998) The Evening Standard (N.Z.), 28 March, 1; "Strike on Again for Hospital Workers" (1998) The Press (N.Z.,) 13 May, 4; "Doctors Strike" (1998) The Dominion (N.Z.), 22 July, 3; S. Hartley, "Outside Contractor Cross Picket" (1998) The Timaru Herald (N.Z.), 18 March, 1; Fire Service Fight" (1998) The Evening Post (N.Z.), 9 July, 3; "Pilots Plan Monday Strike" (1997) The Dominion (N.Z.), 1 November, 1; "NZPA, "Company Hires Security, Union Begins Picketing" (1997) The Evening Standard (N.Z.), 16 September, 1; P. Mathias, "Council Staff Plan Action over Holidays - Warning Given of Strike" (1996) The Press (N.Z.), 26 October, 5; J. Gardiner, "Labour Department Staff Out" (1996) New Zealand Herald, 3 October; H. Bain, "Country Facing a Wave of Unrest, Unions Warn" (1996) The Sunday Star Times (N.Z.), 1 September, 5; "More Telecom Strikes Likely" (1996) The Dominion (N.Z.), 12 August, 9. 125 between employees and employers have all persisted since the advent o f the E C A , and, according to a number o f studies, have increased . 5 5 5 M o r e o v e r , since the enactment o f the E C A , numerous industrial 'battles' have been fought by all manner o f parties. A s K e l s e y describes: Industrial disputes stretched across many sectors - factory workers , nurses, teachers, pulp and paper workers , shop employees, bus drivers. B o t h sides employed tactics that were reminiscent o f the darkest days o f N e w Zealand industrial relations, such as the 1912 W a i h i strike and the 1951 waterfront l o c k o u t . 5 5 6 In the new adversarial environment, both sides employed tactics w h i c h C T U president K e n D o u g l a s labelled 'the start o f Amer ican- l ike industrial terrorism here'. In an extended and acrimonious dispute at the C H H K i n l e i t h m i l l , unions used scanners to intercept the cell-phone communications between company executives. In turn, the company hired private investigators and security firms to monitor u n i o n activities and protect their sites against sabotage. T h e N e w Zealand D a i r y C o m p a n y paid low-level officials to campaign against their o w n union. A l l i a n c e Texti les established an employer-subsidised incorporated society, called the M o s g i e l Independent Thought Society, to represent w o r k e r s ' interests as a rival to the union. A i r N e w Zealand, N Z R a i l and several hospitals recruited strike breakers f r o m overseas . 5 5 7 T h e existence o f widespread conflict and a lack o f co-operation is also confirmed by a recent study conducted by Ian M c A n d r e w . 5 5 8 M c A n d r e w ' s research reveals that contract format ion for the majority o f N e w Zealand employees is n o w a process o f employer dictat ion rather than negotiation and compromise, and that this is primari ly because unions are not invo lved i n the majority o f negotiations. 5 5 5 Dannin, Working Free, at 305; E. Rasmussen, "Chronical" (1997) 22:1 N.Z.J.Ind.Rel. I l l ; E. Rasmussen, "Chronicle" (1996) 21:1 N.Z.J.Ind.Rel. 109; E. Rasmussen, "Chronicle" (1996) 21:3 N.Z.J.Ind.Rel. 328; E. Rasmussen, "Chronicle" (1995) 20:2 N.Z.J.Ind.Rel. 227; G. Jackson, "Study Finds Many Want to Quit Job" (1993) The Press (N.Z.), May 21 at 1. 5 5 6 Kelsey, Rolling Back the State, at 107. 5 5 7 Kelsey, New Zealand Experiment, at 185-186. Again, conduct of this nature would clearly evidence a breach of the duty to bargain in good faith in British Columbia. See supra notes 210-235. 5 5 8 McAndrew, supra note 29. 126 These findings were based o n M c A n d r e w ' s review o f more than 550 separate workplaces . H e found that only 22 percent o f employers engaged in a "negotiat ion m o d e l " o f b a r g a i n i n g , 5 5 9 whereas the vast majority o f employers engaged in a process o f contract formation that bore little resemblance to traditional bargaining behaviour. M c A n d r e w summarised his findings as fol lows: [Ojnly by means o f collective dealing w i t h employers through a bargaining agent, and leading to the formation o f collective contracts, are w o r k e r s able in the current environment to compel employers to negotiate. W h e r e this process is in place, w o r k e r s are almost always i n our sample represented by a union. These groups o f employees have been relatively successful i n resisting employer demands for concessions. B e y o n d this unionised collective negotiations sector, other groups o f employees ... are not effective in modifying employer positions in any w a y that resembles negotiation and that, consequently, concessions have been extracted f r o m these w o r k e r s at a significantly higher rate than is the case for w o r k e r s in the unionised collective negotiations sec tor . 5 6 0 In short, based o n M c A n d r e w ' s findings, employer dictation and non-co-operat ion in the formation (or renewal) o f employment contracts is m u c h more l ikely to occur when the contract is not a collective contract negotiated by a union bargaining agent. These findings are particularly significant, given recent estimates that as few as 20 percent o f the N e w Zealand w o r k f o r c e are n o w covered by collective agreements negotiated by u n i o n s . 5 6 1 Thus, it w o u l d appear that more than three quarters o f N e w Zealand's w o r k f o r c e experience employer dictation as the mode o f contract f o r m a t i o n . 5 6 2 Which McAndrew defines as a bargaining model that exhibits in its logistics and outcomes the sort of give and take conventionally associated with bargaining behaviour in the industrial relations arena. See supra note 29 at 126. 5 6 0 McAndrew, supra note 29 at 138. 561 Supra notes 68 and 83. 5 6 2 A finding which strongly suggests that the inequality of bargaining power which exists in Canada and the United States also exists in New Zealand. The only difference is that the labour legislation in North America expressly recognises that inequality, whereas the ECA does not. 127 M c A n d r e w ' s empirical research is consistent w i t h other s tudies , 5 6 3 and w i t h considerable anecdotal evidence. Instances o f employee powerlessness are frequently reported. A s one N e w Zealand employee lamented: It 's all very w e l l for a member o f a major u n i o n to say " N o , I w o n ' t accept that, i t ' s w r o n g , unfair or unjust", and to say that w i t h some confidence, or to not even have to say it directly to the employer but through his agent. B u t n o w w e ' r e in a situation where w o r k e r s are without their strong union backing, and are face to face eyeballing the employer. Suddenly the balance o f p o w e r is weighted very m u c h in favour o f the e m p l o y e r . 5 6 4 Similar scenarios are reported frequently in the news media, o f w h i c h the f o l l o w i n g excerpt f r o m T h e Press is an illustrative example: ... A n o t h e r w o r k e r was hired as a trainee manager in a fastfood outlet. T w o weeks later her employer presented her w i t h a contract to sign wi thin half an hour. " W h e n I tried to negotiate, I was to ld to take it or leave it. H e said he w o u l d hold pay o w i n g unti l I d i d , " she said. H e r punishment for being the only one o f 15 w o r k e r s w h o resisted the employer 's offer was to be sacked o n the s p o t . 5 6 5 M c A n d r e w ' s findings are further supported by numerous union officials, inc luding R i c k B a r k e r , an officer o f the N e w Zealand Service W o r k e r s Federation. A c c o r d i n g to B a r k e r , in many cases bargaining exists in name only: [ E l m p l o y e r s have learned ... they have the right to veto, the right to say no and, m y G o d have they exercised it. T a k e this or leave it. A n d that's the end o f it in 9 9 % o f the cases . 5 6 6 5 6 3 See e.g., R. Ryan, "Market Rules: Industrial Relations in Hotels and Restaurants" (1997) Paper Presented to AIRAANZ Conference, Brisbane; E. Rasmussen, "Workplace Transformation Under the Employment Contracts Act 1991" in R. Fells & P. Todd eds., Current Research in Industrial Relations (1995) AIRAANZ Conference, Perth, at 463-472. 5 6 4 R. Macfie, "Air New Zealand Employs Vintage Approach" (1991) National Business Review (N.Z.), 4 October, 3. 5 6 5 D. Keenan, "Workers Say Contract Refusal Means Job Loss" (1993) The Press (N.Z.), 11 February, 8. 5 6 6 See Dannin, supra note 53 at 167. 128 T h e N a t i o n a l Dis tr ibut ion U n i o n expresses a similar v iew, describing bargaining among those employees w h o are not union members, in the f o l l o w i n g terms: T h e bargaining process in these cases varies but generally takes the form o f the employer preparing a contract, putting it to the staff and then persuading then to sign. It is rare for there to be any negotiation leading to the alteration o f the employer-drafted contract. E x i s t i n g workers find it hard to get overtime, access to additional hours (there is severe underemployment in the retail sector), and p r o m o t i o n i f they refuse to sign. This is not a genuine negotiating process. It is a perversion o f the term " n e g o t i a t i o n " . 5 6 7 These reports ought not to come as any surprise to the present Government , for the previous N a t i o n a l Government (the main partner in the coalit ion) was t o l d by the Department o f L a b o u r , before the E C A was enacted, that 60 percent o f the N e w Zealand w o r k f o r c e w o u l d be t o o weak to consummate agreements under the E C A . 5 6 8 That these concerns were cast to one side is a testimony to the lobbying p o w e r o f those w h o sought the E C A ' s introduction. C r i t i c i s m o f bargaining under the E C A is not, however, grounded solely o n the occurrence o f widespread employer dictation. There also appears to be a lack o f communicat ion between employers and employees, despite the E C A ' s emphasis o n direct dealings. A c c o r d i n g to the Majority Report: [EJvidence received has also shown that some employers are using the removal o f compulsory unionism as a w a y to tell employees less than before about their rights. Witnesses said that, especially i n companies where the employer has actively encouraged staff to resign f r o m a union, employers often impose contracts wi thout negotiations. Sometimes these contracts contain scant information about employment conditions. M a n y witnesses, particularly f r o m service and retail industries, said employers do not communicate w i t h them about their contracts and frequently intimidate employees into signing contracts w i t h the message that they w i l l be dismissed i f they do n o t . 5 6 9 National Distribution Union, supra note 442 at 3. Department of Labour, Ministerial Brief (1990) 4 October, at 4 and 43. The, Majority Report, at 19. 129 T h e trend towards reduced communicat ion and co-operation was also noted by Oxenbridge i n her case study o f an A r e a H e a l t h B o a r d ' s negotiations w i t h its nursing staff: T h e u n i o n team requested that the [employer] provide them w i t h financial information inc luding projections o f wage costs, breakdowns o f total wage expenditure (into penal rates and ordinary hours), and information o n the proport ions o f workers w o r k i n g ordinary and penal hours. H o w e v e r , the [employer] was reluctant to divulge such information. Consequently, u n i o n negotiators were unable to assess the validity o f "abil ity to pay" arguments put forward by the board, and were also hampered i n their efforts to develop a proposal w h i c h w o u l d not unfairly advantage one group o f w o r k e r s over a n o t h e r . 5 7 0 These various reports, both empirical and anecdotal, clearly contradict the "confl ict free" and "co-operat ive" v i s i o n o f employment propounded by those w h o lobbied for the E C A . D a n n i n , for one, expresses no surprise. In her view: W h a t the N Z E F - [ N Z B R T ] hoped to see was a system o f w o r k e r s and employers -without unions - free to engage in contracting at the lowest possible cost. ... T h e N Z E F - [ N Z B R T ] d i d not want discussion and workplace co-determination w i t h equal partners. T h e y wanted a l a w that w o u l d give them complete contro l and saw the rhetoric o f labour-management co-operation as a benign-sounding w a y to explain their g o a l s . 5 7 1 D a n n i n ' s scepticism is not without foundation. Industry leaders such as B r u c e H a n c o x , former C h i e f E x e c u t i v e o f B r i e r l y Investments L i m i t e d , have stated publ ic ly that free market employment and labour relations is about vested, rather than mutual , interests: Capi ta l is not interested i n a moral society, ethical rights and equal distr ibution o f wealth, or income, or fairness. Capita l is interested i n a return. ... That ' s cr iminal Oxenbridge, supra note 122 at 25. As noted previously, employees have no legal right to request financial data, other than their own individual wage records. See the Minority Report, at 7; and supra note 438. C.f., the position in British Columbia, where information material to a bargain must be disclosed. See supra note 226. 5 7 1 Dannin, Working Free, at 55. 130 i n every sort o f mora l sense ... I k n o w all that. B u t everybody is doing it, and the competitors i n this business are doing it, so w e ' r e doing i t . 5 7 2 This comment provides at least one explanation for w h y M c A n d r e w found employer dictat ion to be so widespread. Presumably not all managers are intent o n dictating to their w o r k f o r c e , and dr iv ing d o w n employee wages; but some are (or at least believe they are) forced to do so i n order to compete w i t h competitors w h o do. This "ratchet ing" effect serves only to encourage widespread employer dictation and the destruction o f employer-employee co-operation. H o w e v e r , even i f one were to assume that a " v i s i o n " o f co-operat ion and conflict free employment was, i n fact, genuinely held by at least some E C A advocates, one might suggest that such a v i s i o n was remarkably naive, given the nature o f the bargaining that occurred under the E C A ' s predecessor . 5 7 3 A l t h o u g h union membership was compulsory in many instances under the L R A , and collective bargaining the norm, the centralised nature o f that bargaining meant that most employers had little or no direct contact w i t h u n i o n officials. This " i s o l a t i o n " was further exacerbated by the fact that many unions failed to secure a strong shop floor presence . 5 7 4 Thus, a significant p r o p o r t i o n o f employers were free to conduct their w o r k places unimpeded by direct union c o n t a c t . 5 7 5 E m p l o y e r s w o u l d , for example, set wage rates unilaterally, a practice w h i c h was lawful provided employees were paid the award m i n i m u m or a b o v e . 5 7 6 In the same manner, 5 7 2 "Bosses Law Exposed" (1991) M&C News (N.Z.), at 7. 5 7 3 And given the experience in other labour law jurisdictions. The National Labor Relations Act in the United States, for example, is based on the view that certain "recognised" sources of strife and unrest exist in industrial relations. See 29 U.S.C.S. s. 151, Findings and Declaration of Policy (West Supp.) at 270. 5 7 4 This was primarily because proactive recruitment of members was not essential in a system of compulsory membership and blanket coverage. 5 7 5 McAndrew, supra note 30 at 183. Interestingly, this finding by McAndrew directly contradicts the NZEF's assertion that union presence in the workplace was generally the cause of poor communication between employers and their employees. 5 7 6 Dannin, supra note 33 at 458; McAndrew & Hursthouse, supra note 45 at 119-120. 131 many employers acted unilaterally on issues such as safety, new technology and overtime. It is, then, little w o n d e r that many employers continued in the same vein in the free market where even less constraints existed. A s D a n n i n argued: L o g i c should have suggested that the new law w o u l d not alter these attitudes or lead employers to embrace a w o r l d o f joint partners i n the enterpr ise . 5 7 7 M c A n d r e w takes a similar v iew: F o r these employers, the E m p l o y m e n t Contracts A c t was an invitat ion to do what they felt was necessary to reduce cost structures. W i t h no prospect o f having to deal w i t h effective unions, and w i t h little tolerance for doing so i f unexpectedly faced w i t h the prospect, these employers wrote 'reasonable' contracts, presented then individual ly or collectively to employees, and expected them to be signed. ... [Tlhese employers were not experienced i n negotiating w i t h unions, and saw no value i n it. F a c e d w i t h no statutory obligation or real pressure to bargain in a conventional sense, they developed new contracts on the basis o f their o w n impression not only o f their o w n needs, but o f employees' needs, and o f what was ' fa ir ' and what was 'realistic ' in the w a k e o f the E m p l o y m e n t Contracts A c t . H a v i n g done so, they generally saw little r o o m for further compromise, bel ieving that they had already compromised their o w n interests by consideration o f the other factors. In essence, they ' internalised' the negotiations, 'seeing both s i d e s ' . 5 7 8 T h e dictat ion (and resulting lack o f co-operation) that n o w occurs under the E C A is not, however, s imply a continuation o f the less than co-operative approach to management frequently taken by employers under the L R A . A s a number o f commentators have noted, the E C A has increased employer/employee tension. K e l l y , for example, suggests that the E C A has created a system o f employment and labour relations that is n o w more adversarial then ever. In his v iew, legalistic obsession w i t h the contractual nexus has lead 5 7 7 Dannin, Working Free, at 19. 5 7 8 McAndrew, supra note 30 at 183-184. 132 to formal ism and increasingly adversarial attitudes. W a l s h agrees, stating that there n o w exists i n N e w Zealand: [ A ] g r o w i n g sense o f employer strength and (in some quarters) militancy, and a more confl ictual and antagonistic approach to industrial relations rather than the idealised picture o f harmonious co-operation sketched by [ E C A ] advocates . 5 8 0 These v iews are endorsed by many in organised labour. A c c o r d i n g to K e n D o u g l a s , president o f the C o u n c i l Trade U n i o n s , the E C A has created a "revenge" mentality in the market place: T h e E m p l o y m e n t Contracts A c t says y o u get what y o u can, when y o u can, h o w y o u can. I f that is the game plan, w e w i l l play by those rules. W e w i l l take our cue f r o m employers, and where there is economic and industrial leverage, w e w i l l use it. L e t ' s not hear the wai ls about the national interest. U n d e r the E m p l o y m e n t Contracts A c t there is no such thing. W h e r e the simple force o f market p o w e r al lows employers temporary industrial dominance, be warned. There is a revenge mentality bui lding up, and w e w i l l see that as organisational capital, to draw on when w e c a n . 5 8 1 T o some extent, this reaction is occurr ing already. A s Harbr idge has noted: Industrial action, particularly in the public sector, is g r o w i n g in N e w Zealand and w i l l no doubt develop as unions (and their members) decide to resist further claims for concession bargaining and to make proactive claims for wage increases. T h e sting in the tai l o f the new breed o f unions may w e l l be more than most employers bargained o n . 5 8 2 In summary, it is suggested that the experience to date under the E C A serves to discredit the three fundamental v iews advocated by E C A supporters, to w h i c h reference was made G. Kelly, "Structural Change in New Zealand: Some Implications for the Labour Market Regime" (1995) 134 IntT. Lab. Rev. 333 at 342. 5 8 0 P. Walsh, "The Employment Contracts Act", in The Decent Society? Essays in Response to National Economic and Social Policies, Boston & Dalziel eds., (Auckland, Oxford University Press, 1992) 59 at 74. 5 8 1 Douglas, supra note 112 at 203. See also Grills, supra note 26 at 100. 5 8 2 Harbridge & Crawford, supra note 68 at 245. 133 previously. In the first place, it is naive at best, and dishonest at worst , to describe employment as a relationship based on complete co-operation and non-confl ict ing mutual interests. W h i l s t the objectives o f employers and employees can, and do, overlap, this is not always so, as evidenced by the frequency w i t h w h i c h conflict continues to occur between employers and employees in N e w Zealand. This conflict has not been eradicated by the free market, it has simply been left to be resolved by raw market power. T h e result is frequent and widespread employer dictation. Secondly, unions cannot be blamed for m u c h o f this conflict and dictation, g iven its frequent occurrence i n " u n i o n free" w o r k sites and negotiations. A n d thirdly, not only has the E C A failed to counter this "anomalous" behaviour, i f anything, such behaviour has been fostered, and exacerbated, by the present free market approach to bargaining. T o call such widespread behaviour "anomalous" is to ignore reality. A c c o r d i n g l y , assertions that a duty to bargain in g o o d faith has no place in N e w Zealand because conflict does not, or should not, exist, ought to be treated w i t h scepticism. In the current N e w Zealand system o f employment and labour relations it can be argued w i t h considerable persuasion that mechanisms such as a duty to bargain in g o o d faith, w h i c h are aimed at the avoidance, and resolution, o f conflict, w o u l d have an important and valuable role to play. The Efficiencies of Free Market Bargaining I f one were to put to one side for the moment the existence o f this conflict and dictation, one is still left w i t h the issue o f h o w efficient "free market" labour bargaining actually is. If, at the end o f the day, a bargaining regime o f this nature delivered labour market efficiency, p r o d u c t i v i t y 5 8 3 and general prosperity, then perhaps there w o u l d be less need for bargaining controls. "Productivity" is used here to mean output per employee. 134 Proponents o f the E C A invariably argue that the current permissive model o f bargaining has been responsible for enhanced labour market e f f ic iency. 5 8 4 A c c o r d i n g to the P u b l i c Service: [W]here employers and employees are free to negotiate solutions w h i c h respond directly to the circumstances they face, those solutions are l ikely to facilitate the appropriate al location o f resources across the economy and the efficient use o f those resources . 5 8 5 In the same vein, the P u b l i c Service is crit ical o f changing the current approach, remarking that "greater prescriptiveness over bargaining arrangements risks reducing f lexibil ity and adaptability to changing c i r c u m s t a n c e . " 5 8 6 This assertion endorses the N e w Zealand Treasury 's cr i t ic ism o f the bargaining regime that preceded the E C A . A c c o r d i n g to the Treasury 's Government Management briefing i n 1987, rising unemployment and l o w product iv i ty at that t ime was a direct result o f the highly regulated bargaining that occurred under the L R A . 5 8 7 Undoubtedly , many employers have enjoyed the power o f dictation since the E C A was introduced. F r o m their perspective, at least, achieving changes to their labour arrangements has been extremely cost effective. Y e t critics o f the E C A have questioned whether this approach has actually led to enhanced productivi ty and efficiency. In the first place, a number o f the studies w h i c h have credited bargaining under the E C A w i t h enhancing product iv i ty have been based on the " impressions" o f managers, rather than empirical e v i d e n c e . 5 8 8 This has caused commentators to allege that such claims are 5 8 4 Supra notes 108-111. 5 8 5 Supra note 181 at 219. 5 8 6 Supra note 183. 5 8 7 See Kelsey, New Zealand Experiment, at 174. 5 8 8 For example, both Kerr and Knowles refer with approval to 1996 surveys which illustrate, at least in their view, that the ECA has resulted in "increased productivity, operational flexibility and greater training." (See Kerr, supra note 66 at 96; Knowles, supra note 127 at 86). However, the surveys to which they refer (see The New Zealand Institute of Economic Research, Quarterly Survey of Business Opinion 135 " i d e o l o g i c a l " rather than "analyt ical" , and further, that many employers are confusing wage cuts w i t h enhanced p r o d u c t i v i t y . 5 9 0 A s E a s t o n points out, whi le reducing labour costs may be considered important to an employer, "this is not the same thing as [improving] p r o d u c t i v i t y . " 5 9 1 K e l s e y concurs, noting that: [ M ] o r e people w o r k i n g for lower labor costs does not mean product iv i ty has increased; it merely shows income transfers f rom labor to c a p i t a l . 5 9 2 In this respect the E C A may, in fact, foster inefficiency by enabling managers to cut wages, rather than having to l o o k to innovation and skil l enhancement, as a means o f increasing profitability. A s D a n n i n notes: T h e 1993 L a b o u r Select Committee M i n o r i t y R e p o r t found that some employers w h o were unable to reach agreement restructured so that there were fewer positions. They then offered the new positions to their w o r k e r s o n the condi t ion that they accept the inferior terms or be laid off. T h e report concluded: " W e do believe that the E m p l o y m e n t Contracts A c t provides a cop-out scenario for poor management in that it can disguise its o w n organisational deficiencies by artificially cutting labour i n p u t s . " 5 9 3 These v iews are borne out by cases studies such the one conducted by Oxenbridge: T h e A c t ' s opponents maintain that the legislation leads to a short-term cost-cutting focus among employers, w h o fail to recognise the benefits o f investing i n l o n g -term initiatives such as skills development, w o r k p l a c e design and w o r k method reform, all o f w h i c h were included in the [union's] proposal for w o r k p l a c e reform. T h e board 's initial rejection o f the proposal , and its reluctance to accept that the (1996) March, and J. Savage, "What do we Know about the Economic Impacts of the ECA?" (Wellington, NZ Institute of Economic Research, 1996)) were both based on the impressions of managers rather than any statistical or empirical evidence. See Easton, supra note 61 at 214. 5 8 9 Harbridge & Crawford, supra note 68 at 246. 5 9 0 Dannin, Working Free, at 168-169; Harbridge & Crawford, supra note 68 at 247; Rasmussen & Deeks, supra note 61 at 288. 5 9 1 Easton, supra note 61 at 215. 5 9 2 Kelsey, supra note 57 at 271. 5 9 3 Dannin, Working Free, at 169. 136 concept was relevant to contract negotiations, validates such crit icisms o f the A c t . ... T h e A c t ' s implici t aim o f reducing wage costs featured prominently i n the board 's bargaining strategy, whi le longer-term initiatives were excluded f r o m 594 negotiations. Pearson and R o s e report a similar example: L e a k e d B o a r d minutes o f a medium sized A u c k l a n d manufacturer reveal directors deciding, as a matter o f policy, to use the [ E C A ] to reduce w o r k e r s ' employment conditions. T h e y estimate savings o f several thousands o f dollars, w h i c h w i l l enhance company profitability. There is no suggestion o f expansion, reinvestment or productivity-based b a r g a i n i n g . 5 9 5 Such reports are significant, for although wage reduction may enhance profitabil ity in the short term, serious questions must arise as to whether cost cutting contributes to sustainable productivity. A c c o r d i n g to D a n n i n : [I]t has not taken l o n g to see that N e w Zealand employers ' long-term interests are suffering as skills decline and trained workers become a rarer commodity . O r , to put this into the sort o f language preferred by the E C A ' s proponents, m i c r o -rationality is leading to macro- irrat ional i ty . 5 9 6 E a s t o n is equally crit ical o f short term cost cutting: [W]e need to distinguish between short-term flexibility, such as that the E C A promotes, and long-term flexibility, w h i c h is about h o w a labor force increases its skills and ability to carry out a multitude o f tasks. It is possible that long-term flexibil ity is undermined by short-term flexibility, w h i c h inhibits the w o r k e r f r o m developing a loyalty to the f irm ... while also discouraging the f i rm f r o m developing ... skills in its workforce . ... [T]he E C A ... c o u l d undermine the development o f long term p r o d u c t i v i t y . 5 9 7 Oxenbridge, supra note 122 at 26. M. Pearson & R. Rose, "Sign or Resign: Who Wins with Contracts" (1992) Management, June, at 57. Dannin, Working Free, at 292. Easton, supra note 61 at 216. 137 Free market advocates respond by arguing that the market itself w i l l punish short sighted behaviour o f this k i n d ; that only the truly innovative w i l l prosper. Y e t such assertions are problematic. T h e y fly in the face o f the continued desire o f employers to relocate to jurisdict ions offering cheaper l a b o u r . 5 9 8 Indeed, N e w Zealand has been promoted as a destination for foreign employers, for this very r e a s o n . 5 9 9 M o r e o v e r , in a market place that operates o n bargaining power there is ample opportunity at present for employers to counter the innovat ion o f competitors by driv ing their o w n employees' wages even lower. G i v e n the current climate o f high unemployment, there is little prospect o f this type o f conduct ending in the foreseeable f u t u r e . 6 0 0 T h e extent to w h i c h employers are using the permissive bargaining model to enhance the efficiency o f their individual employees, and their o w n bargaining processes and outcomes, is also debatable. In terms o f the efficiency o f individual employees, it is notable that many o f the workplaces w h i c h have m o v e d f rom a collective labour arrangement to individual contracts, have simply instituted numerous individual contracts w h i c h are identical save for wages rates . 6 0 1 L i t t l e i f any tai loring o f employment contracts has been sought. Similarly , research by Harbr idge in 1994 indicated that only 16% o f the contracts surveyed made any connection between pay and p r o d u c t i v i t y . 6 0 2 A d d i t i o n a l l y , G i l s o n and W a g a r have questioned whether labour market product iv i ty has been enhanced by the overal l drive towards individual employment contracts : 6 0 3 A practice Lord Wedderburn describes as "globalised localisation". See Lord Wedderburn, Labour Law and Freedom: Further Essays in Labour Law (London, Lawrence & Wishart, 1995) at 287. 5 9 9 J. Barber, "NZ Touted as Land of Cheap Labour" (1991) The Dominion (N.Z.), 30 October. 6 0 0 In stark contrast to the low wage strategy implemented by many New Zealand employers, a recent report commissioned in British Columbia recommended a high wage/high productivity approach as a means of enhancing the international competitiveness of the British Columbia workforce. See Managing Change, at 2-5 & 45. ' 6 0 1 Dannin, Working Free, at 236-237; Harbridge, supra note 89 at 75. 6 0 2 Harbridge, supra note 102 at 18. 6 0 3 Telecom, for example, apparently has a policy to de-unionise its entire workforce and move all of its staff on to individual contracts. See Kelsey, supra note 57 at 267. 138 F a r f r o m finding new innovation and workplace flexibility, the pursuit o f indiv idual contracts i n unionized organisations is typical ly found to be associated w i t h simple cost-cutting exercises, defensive business strategies, w o r k f o r c e reduct ion, and a marked absence o f any f o r m o f progressive decision-making. M o s t dramatic o f al l , however, despite intensive review o f all available data, w e cannot find a single statistically significant or reliable relationship between organizations pursing indiv idual contracts and our exhaustive measures o f firm p e r f o r m a n c e . 6 0 4 A s regards employers seeking to tailor their o w n bargaining processes and outcomes to enhance their efficiency, M c A n d r e w ' s research found no identifiable correlat ion between the level o f pressure an employer was under to reduce costs and the employer 's choice o f bargaining process and contractual outcome (i.e., whether collective or individual in each c a s e ) . 6 0 5 A c c o r d i n g to M c A n d r e w , the only factors w h i c h appeared to significantly affect these decisions were the size of, and union presence in , the particular w o r k p l a c e . 6 0 6 T h e final, and perhaps most conclusive, indicator that free market bargaining has not delivered the enhanced efficiency promised by E C A advocates, are the p o o r overal l figures regarding N e w Zealand's recent product iv i ty growth. A c c o r d i n g to the O E C D , during the per iod 1992-1996 N e w Zealand achieved a productivity g r o w t h rate o f just 1.5 percent per annum, a level w h i c h the O E C D considers to be manifestly inadequate . 6 0 7 Other estimates have been even lower. A c c o r d i n g to economist B r i a n Phi lpott , the average annual product iv i ty increase between 1992 and 1996 was just 0.7 per c e n t . 6 0 8 M o r e o v e r , it appears that productivi ty actually fell by 1.6 percent in the 1995/1996 financial y e a r . 6 0 9 6 0 4 Gilson & Wagar, supra note 80 at 230-231. 6 0 5 McAndrew, supra note 29 at 128; See also I. McAndrew, "The Structure of Bargaining Under the Employment Contracts Act" (1992) 17:3 N.Z.J.Ind.Rel. 259. 6 0 6 McAndrew, supra note 29 at 135 and 139. 6 0 7 OECD, Economic Survey: New Zealand (1996) at 10. See Rasmussen & Deeks, supra note 61 at 288. 6 0 8 B. Philpott, "A Note on Recent Trends in Labour Productivity Growth" (1996) Research Project on Economic Planning (Wellington, Victoria University, 1996). 6 0 9 Bill Birch, Pre-Election Economic and Fiscal Update (1996) at 49. 139 N o r have p o o r efficiency returns been l imited to the private sector. A s K e l s e y has noted: L o w morale and high turnover contributed to deprofessionalization in some state sector agencies staffed by an increasingly deskil led and casualised w o r k f o r c e . T h e institutional memory o f central government had been jeopardised. A P S A pilot audit o f public service staff in 1996 confirmed w o r k e r s ' concerns that qualities o f professionalism, loyalty, innovation, and commitment to publ ic-wel l-being were being subordinated to the goals o f efficiency and managerialism. M e a n w h i l e , polit icians had distanced themselves f rom responsibility for the operation and inadequacies o f the state s e c t o r . 6 1 0 These less than impressive findings accord w i t h Easton 's conclusions as regards the E C A and productivi ty: I f the E m p l o y m e n t Contracts A c t had w o r k e d in the w a y it proponents c la im, there should have been substantial and ongoing productivity gains. Such gains have not occurred. ... [N]o statistical evidence exists for substantial gains i n product iv i ty above the trend o f previous years fo l lowing the introduct ion o f the E C A . ... [T]he primary gains to employers f rom the E C A have been l o w e r pay and greater freedom to manage, not higher output per w o r k e r . 6 1 1 M a n y advocates o f economic reforms have tended to hypothesize certain benefits and then assume that these benefits have been necessarily realised after the reforms were implemented. They then selectively use anecdotes and statistics to buttress the case. Systematic empirical investigation ... often suggests otherwise. This pattern has been true among advocates o f the E C A . O n the basis o f the empirical evidence and systematic analysis, it is very difficult to reach strong conclusions about the beneficial effects o f the E m p l o y m e n t Contracts A c t . In particular, the p o o r product iv i ty g r o w t h rules out the l ike l ihood that the E C A was a major contributor to the macroeconomic expansion o f the mid-1990s. H o w e v e r , the A c t does seem to have contributed to the p o o r real wage g r o w t h and the failure o f many w o r k e r s to obtain a share in any increase in the prosperity o f the 1 9 9 0 s . 6 1 2 Rasmussen agrees, noting that: 6 1 0 Kelsey, supra note 57 at 268. 6 1 1 Easton, supra note 61 at 214-215. 6 1 2 Easton, supra note 61 at 217. 140 T h e economic impacts o f the A c t have been less than clear cut. Changes in real wages, labor, productivity , and levels o f employment and unemployment obviously have some relationship to the E C A . H o w e v e r , h o w large (or small) cannot be determined w i t h any great confidence ... W e have l o o k e d at the product iv i ty data and observed that the anticipated productivi ty benefits o f the A c t have not been f o r t h c o m i n g . 6 1 3 Unfortunately for N e w Zealand, the future (in terms o f labour market product ivi ty) does not appear to be any more promising. A c c o r d i n g to the June 1997 consensus forecasts o f the N e w Zealand Institute o f E c o n o m i c R e s e a r c h , 6 1 4 N e w Zealand's economy w i l l g r o w at a l o n g term rate o f under 3 percent per annum, w h i c h w i l l be based primari ly on an increased use o f labour and capital, but not on any significant increase in labour p r o d u c t i v i t y . 6 1 5 These v iews are supported by the Reserve B a n k o f N e w Zealand, w h i c h has predicted a trend i n product iv i ty g r o w t h o f no more than 1.25 percent per a n n u m . 6 1 6 G i v e n the forgoing, claims that free market bargaining under the E C A has contributed to enhanced efficiency and productivity , and w i l l continue to do so, are i l l- founded. Rather, the only enduring "achievements" o f the bargaining regime instituted by the E C A appear to be the enhancement o f employer control , and the reduction o f wage costs - neither o f w h i c h have produced any quantifiable increases in the efficiency o f the labour market. 6 1 3 Rasmussen & Deeks, supra note 61 at 295. 6 1 4 Which averages out the predictions of fourteen separate forecasters. 6 1 5 Easton, supra note 61 at 213. 6 1 6 D. Brash, "The New Inflation Target and New Zealanders' Expectations About Inflation and Growth" (1997) Address to the Canterbury Chamber of Commerce, 23 January. 141 Distributive Efficiency611 T h e rhetoric o f free market advocates often refers to the " g o o d o f a l l " : o f the E C A del ivering benefits to both employers and employees. Indeed this was h o w the E C A was sold to the N e w Zealand public by the N a t i o n a l Party both before and after it was elected to p o w e r i n 1990: B y introducing voluntary unionism and changing bargaining procedures [the E C A ] w i l l increase productivity , enhance employment and encourage the sharing of benefits that flow from increased output.618 T h e n e w bargaining environment w i l l provide excit ing opportunities to bargain directly around efficient business operations, leading to substantial product iv i ty gains. It is vi ta l for the future o f N e w Zealand that the opportunity for product iv i ty gains is taken up by employers and employees, and that those businesses share the benefits o f those gains through higher wages for all New Zealanders619 It is also h o w the E C A continues to be packaged and promoted by its supporters. A c c o r d i n g to K e r r : T h e E m p l o y m e n t Contracts A c t has seen a fundamental shift in the nature o f industrial relations in N e w Zealand, and one that benefits the majority o f employers and employees . 6 2 0 6 1 7 The term "distributive efficiency" is used here to describe the distribution of income and wealth among New Zealanders. See for discussion C. Blyth, "The Economist's Perspective of Economic Liberalisation" in A. Bollard & R. Buckle eds., Economic Liberalisation in New Zealand (Wellington, Port Nicholson Press, 1987) 3. 6 1 8 National Party, Election Manifesto (1990) at 27. [Emphasis added]. 6 1 9 Address by W. Birch to the New Zealand Parliament, "Introduction of the Employment Contracts Bill" in Hansard, Parliamentary Debates of New Zealand (1990) 19 December, 482. [Emphasis added]. See also the address to Parliament by the Minister of Commerce, Philip Burdon, delivered on the eve of the ECA's enactment, which included the following excerpt: "The Bill is designed to ensure that New Zealand has an industrial system that will allow workers to enjoy genuine increases in living standards." See Hansard, Parliamentary Debates of New Zealand (1990) 19 December, 484-485. 6 2 0 Kerr, supra note 66 at 98. [Emphasis added]. 142 These same supporters berate state intervention and regulation as being harmful to employees. A s K e l s e y describes: Treasury wanted government expenditure constrained through a comprehensive reappraisal o f existing institutions and policies, especially health, education and social welfare. Inefficiencies, it said, w o r k e d against the p o o r and unemployed by depriving them o f the benefits o f economic recovery, and lack o f incentives prevented people f rom achieving dignity, security and participation in s o c i e t y . 6 2 1 T h e key for both employers and employees, according to Treasury, was a free market approach to employment and labour relations: Unless the regulatory framework is flexible and permissive enough to a l l o w adaptation to changing conditions, the consequences w i l l be felt in continuing high levels o f unemployment, lost opportunities for young people to gain skills, continued s low g r o w t h in productivity, and poor economic p e r f o r m a n c e . 6 2 2 I f Treasury is to be believed, the free market introduced by the E C A represented a panacea for the ills o f both employers and employees. H o w e v e r , as D e e k s has noted, the ability o f the free market to equitably distribute wealth has been touted but not substantiated. A c c o r d i n g to Deeks , there has been little attention paid to: [T]he ability o f the deregulated market to deliver both economic performance and an equitable society. Questions o f market regulation or deregulation were not argued i n relation to outcomes, that is, in relation to the demonstrable efficiency or inefficiency o f the market as a creator o f wealth and a regulator o f goods and services. Rather they were argued in relation to beliefs, to ideology. T h e market was given mora l authority; it was a prior " g o o d " rather than g o o d as a consequence o f what it c o u l d and did d e l i v e r . 6 2 3 6 2 1 Kelsey, Rolling Back the State, at 83. 6 2 2 Treasury, Government Management: Brief to the Incoming Government 1987 (Wellington, Treasury, 1987) Vol. 1, at 270. 6 2 3 J. Deeks, "Introduction: Business, Government and Interest Group Politics", in Controlling Interests: Business, The State and Society in New Zealand, J. Deeks ed., (Auckland, Auckland University Press, 1992) 1 at 10-11. 143 E a s t o n concurs, having noted that: Al legat ions that policies w h i c h make the r ich richer w i l l also benefit the p o o r have been more a matter o f wishful thinking by the r ich than the conclusions o f any r igorous ana lys is . 6 2 4 T h e concerns expressed by D e e k s and E a s t o n have surfaced in the form o f employer attacks o n the wage o f those employees w i t h little bargaining power. A s noted in chapter one, whi le many employees in the primary labour market have received significant pay increases, others have suffered pay cuts or ni l increases. In many industries penal rates and over-t ime allowances have been abolished completely, and base rates have been cut or have remained static. M o r e o v e r , it is not only "corporate" employers w h o have reduced the earnings o f their employees. A s K e l s e y notes: Perhaps the most poignant case saw the Presbyterian, M e t h o d i s t and Salvat ion A r m y social service