Shackles of contract, Raymond Harbridge

Working Free: The Origins and Impact of New Zealands Employment Contracts Act
Ellen J Dannin
Auckland University Press $39.95
ISBN 1 86940 174 3

In early 1991 a senior member of my faculty commented to me: “Harbridge, industrial relations is over now. The Employment Contracts Act has come along – you’d better think about retraining for some other line of work.”

My response was that nothing could be further from the truth. Industrial relations (or, as we now call it, “employment relations”) would be a real growth area for teaching and research now that each and every firm has little or no option but to consider the organisation of work and how this would be reflected in the type and content of employment contracts negotiated or imposed.

I was right. Student numbers in undergraduate and post-experience courses have trebled as “people and organisation” issues have become more critical to the success of organisations. Ellen Dannin’s new book, Working Free, will sell well. It is the first book for four years to focus on the Employment Contracts Act and its breadth of coverage will make it a winner (that is, a prescribed text) in the student market and for the general reader. Given the enormous international interest in the labour market deregulation, the book is also destined to sell well internationally.

The reason for its success, quite apart from any merit the book itself may have, is linked to the ongoing controversy over the Employment Contracts Act. Dannin quotes Business Roundtable executive director Roger Kerr as stating in Apri1 1991: “Labour relations policies are not a matter of debate in successful countries. I would be surprised if they are a source of contention in New Zealand in a few years.” Labour relations has remained contentious and a source of debate, so New Zealand is either unsuccessful or Roger is surprised.

The Act has remained contentious, even though we are now some seven years out from its inception. Sufficiently contentious for the Employers Federation to have commissioned a public opinion poll with the purpose of laying aside the myths about the unpopularity of the Act.

The poll results have themselves been contentious. They summed to 110%. When adjusted, the poll identified that 37% of respondents approved of the Act, 22% disapproved and 41% neither approved nor disapproved or hadn’t heard of it. A previous poll, undertaken by a different polling company just four months earlier, had shown 49% disapproved, 30% approved and 2l% “didn’t know”. Approval for the Act then, regardless of which poll is believed, is by no means widespread and it was no surprise that labour law reform was on the electoral agenda in 1996.

The title, Working Free, is a parody of Penelope Brook’s Freedom at Work: The Case for Reforming Labour Law in New Zealand, published in 1990. Brook, a policy analyst and economist then employed by the Business Roundtable, offered, according to Dannin, a major piece designed to give intellectual respectability to (the Business Roundtable’s) labour views”.

Brook drew heavily on the ideas of Chicago torts and contracts law professor Richard Epstein. Dannin is no supporter of Epstein, Brook or the Business Roundtable and is no supporter of the Employment Contracts Act. (Brook herself was unhappy with the Employment Contracts Act – but from another perspective. In 1991 she described it as an incomplete revolution.)

Working Free is in two parts which stand independently. Part 1 deals with “How the Employment Contracts Act Came to Be” and canvasses the labour relations system as it was, the growth of the campaign to change the “old” system and the drafting and passage of the employment contracts legislation. This section is well written, accurate (as far as I can tell) and offers some new insights while raising old controversies.

One of Dannin’s more interesting insights is that the old “award” system actually worked to keep unions away from workplaces and less able to limit management prerogative:

“As long as awards were minimum condition documents, they allowed employers to set virtually all terms and conditions of employment.” I have long regarded this as being the case. However, the difficulty was that most employers in the l980s didn’t and so failed to take control over workplaces, leading to an inertia in workplace flexibility practices.

One controversy, an old chestnut really, reviewed by Dannin is why the Council of Trade Unions (CTU) failed to call for a general strike during the passage of the legislation in 1991. This issue has plagued the CTU ever since and six and a-half years after the (non) event, CTU research director Peter Harris presented a paper to the Council’s fifth biennial conference in October titled, “Was the CTU Wrong not to call a general strike in 199l?”

Part 2 deals with the effects of the Employment Contracts Act, focusing primarily on legal matters. The chapter on the economic and social impacts of the Act is regrettably light but in part that is a function of the absence of credible data. The legal matters raised focus on the absence of process rules within the Employment Contracts Act and the role of the Employment Tribunal, Employment Court and Court of Appeal in determining what procedures employers, unions, bargaining agents and employees should follow in negotiation processes.

Judicial activism was to be expected given that the legislation itself did not prescribe how bargaining was to take place and the consequent need for judicial interpretation. Increasingly, the Employment Court has taken an activist approach to employment law premised on the notion of fairness, inducing revisiting and overturning contractual issues agreed by the parties. However, this approach was led by the Court of Appeal and subsequently adopted by the Employment Court itself.

This activism has been controversial and has led employer groups to be dissatisfied with the courts performance. Take the issue of impasse, for example. The Act provides for sanctity of contract – change cannot be unilaterally imposed. Employees on collective employment contracts that have reached their nominal expiry date are taken to be on individual employment contracts based on the former collective contract. Employers seeking a change to employment conditions cannot do so unilaterally and must continue to negotiate the changes sought. If the employee rebuffs such negotiations, the status quo remains. This is not what employers had expected from the freedom to contract they had been offered through the Employment Contracts Act.

Employees on the other hand had expected that the existence of a collective employment contract meant that some genuine negotiations had taken place before the contract was enacted. They have however found that “collective” simply means that two or more employees are party to the contract and that negotiations are not required. “Sign or resign” has its place in the labour law regime. Dannin reviews these issues and the internal inconsistencies between the actuality of the legislation and the philosophy it represents.

One difficulty in writing a book of this nature is simply related to the timeline. I suspect that Dannin, a professor of law at Western California University, wrote the book mostly in 1995, based on information gathered on her various trips to New Zealand prior to that. A reputable publisher such as Auckland University Press takes time to have a manuscript reviewed and changes made before final acceptance, and then further months actually to produce page proofs, print and distribute the final text. Had this been a book of poems, the time delays would have been of little consequence. As a text dealing with the rapidly developing employment case law, the timing has been of considerable consequence.

The courts’ approach and thinking on the Act has shifted dramatically since 1994 and only one case in the post-l994 period (NZ Fire Service Commission v Ivamy, l996) is quoted. Relevant case law has been developed through a variety of decisions since that time (the most important of which have been Airways Corporation of NZ v NZ Airline Pilots Association and Couling v Carter Holt Harvey) but there was little opportunity for Dannin to have revised her book accordingly. (In any event, this would be an endless task.) As a result, the reader would be smart to ensure that up-to-date legal advice was sought before applying the principles in Working Free – the principle of “buyer-beware” applies.

While timing may be a problem, Dannin has one major advantage over local writers: living outside the fishing village known as “New Zealand”, she has far greater freedom to express unconstrained views. I find it hard to imagine, for example, that any of my academic colleagues here would have described the speculations of Ralph Stockdill, general manager of the Department of Labour’s Industrial Relations Service, on the problems likely to emerge under the employment contracts legislation, as “naive”. Dannin’s views on various matters through the book are refreshing and no doubt await controversy.

It is regrettable that Dannin didn’t consider a third part to Working Free, dealing with what she would do to prescribe a reform of the Employment Contracts Act to account for the difficulties she outlines in such detail. I, for one would be interested in knowing how she would resolve the internal inconsistencies within the Act and how she would resolve the difficulties over bargaining representation and impasse. Perhaps there is a paper on the drawing-board somewhere. But, given Dannin’s extensive experience and knowledge of both the National Labor Relations Board system in the United States and the Employment Contracts Act here, she is ideally placed to comment on how the legislation could be redrafted to meet the objections and inconsistencies she raises.

The Coalition agreement of December 1996 affirmed that the Employment Contracts Act is the correct way to handle labour relations matters. Nonetheless the agreement foreshadowed significant changes to the roles of the Employment Tribunal and the Employment Court. The agreement stipulated that the separate employment law jurisdiction will remain “in the meantime”. In the intervening period the agreement proposes a formal review to determine if Parliament’s intentions have been clearly expressed in order to “minimise judicial activism in the employment area”.

For many the results of the review are a foregone conclusion, given the Minister of Labour’s contention that the Act’s lack of clarity “has led to some court decisions clearly inconsistent with the principles of the Act”. The New Zealand Herald in March 1997 interpreted the proposed review as the passing of a “death sentence” on the Employment Court. Working Free clearly articulates the areas where “Parliament’s intention” was not clearly expressed and will be useful to parliamentarians and others wanting to make a submission, should the proposed review take place.

A minor quibble is the practice of “endnoting”. It would be an easier read if the publisher had used footnotes rather than endnotes as a technique of annotating Dannin’s numerous references. Flicking to the end of each section in search of the reference was a little frustrating.

Working Free will sell well. It is an interesting read, and is accessible to both lay and specialist readers.

Raymond Harbridge is professor and director of the Graduate School of Business and Government Management at Victoria University of Wellington.

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