Binding arbitration and labour disputes

Last week the Minister of Health, Simeon Brown, wrote to both Te Whata Ora and the ASMS calling on the two parties to conclude their long-running dispute over a new collective agreement by agreeing to settle the dispute by binding arbitration – allowing a third party to decide the terms of settlement that would bind the two parties. The letter from the Minister also made it clear that additional funding for a settlement was not available.

Unsurprisingly the proposal was accepted by Te Whata Ora and rejected by the ASMS.

While the settlement of terms and conditions by compulsory and binding arbitration was common from 1894 to 1987 under the IC&A Acts and its successors, current law makes no provision for arbitration, compulsory or agreed. The one exception is for the Police who are legally prohibited from striking and, if an agreement cannot be negotiated, terms and conditions are settled by final-offer arbitration. Winner takes all.

 For completeness it should also be noted that the Employment Relations Authority does have limited powers to fix terns and conditions if there has been a “serious and sustained breach of good faith in relation to bargaining” (s 50J). This provision is not relevant to the current dispute.

 The Act also provides a facilitation process which allows the Authority to make recommendations about the terms of a collective agreement. Such recommendations are not binding (s 50H). Facilitation has been attempted during the current dispute but was unsuccessful in resolving it. I am of course not privy to what, if any, recommendations were made during facilitation but given the centrality of funding to the negotiations it would be surprising if funding restrictions were not noted.

So what about binding arbitration? The Minister’s proposal raises two issues: first, does the law allow for binding arbitration in such cases?, and second, why would a union agree to it even it was permitted?

The law first. The Employment Relations Act provides a clear structure for collective bargaining. Once bargaining is initiated by one party to the proposed agreement the parties are required to bargain in good faith until (hopefully) a proposed collective agreement is agreed. However, that is not the end of the matter.  Most importantly, any proposed agreement must be ratified in accordance with a ratification procedure notified at the commencement of bargaining (s 51).

That procedure in most, if not all cases, is that the proposed agreement must be voted on by all union members who will be bound by the agreement and the agreement approved by a majority of those voting. Such rules are incorporated in union constitutions and quite properly ensure that new agreements must be approved by those who will be bound by the agreement’s terms and conditions.

In other words, even if arbitration was agreed to it could not be binding – at best it could result in a proposed agreement to be put to the impacted union members for a ratification vote.

The minister’s later response, which appeared to view membership ratification as a problem to be get around, is contemptuous of the democratic structures of unions and the principle that those most affected by an agreement should have the right to accept or reject an employer’s offer.

Why would the Minister propose arbitration and why would the ASMS agree to it? From the Minister’s perspective the proposal is good PR. There is a dispute seriously impacting the public health service which has dragged on for well over a year – how reasonable and sensible to bring in a disinterested third party to make a decision on the issues in dispute! Another factor, not mentioned by the Minister' is that arbitration tends to strongly favour the employer. Police officers were far from happy with the arbitrator accepting the employer’s offer in arbitration earlier this year.

The ongoing dispute involving Air Canada provides examples of a number of problems. It will be recalled that the dispute involved remuneration generally but in particular a claim that unpaid work undertaken prior to takeoff by flight attendants should be paid. Air Canada, in the full expectation that the Government would prohibit any strike and force the dispute to arbitration, effectively stonewalled bargaining knowing, based on past history in arbitrations, that it was unlikely an arbitrator would agree to the new payment which would have been a significant departure from North American practice. When the union stuck to its strike plan, on the basis that strikes were constitutionally protected, Air Canada rapidly agreed to the new payments. The parties are now back in negotiation as to the amount of that payment.

History shows that arbitrators tend to be conservative and in particularly are receptive to arguments that a pay rise is not affordable or that an employer is working within budget limitations imposed from outside and over which it does not have control – always a good argument with state sector employers who argue they are not funded for the sought pay increase.

At the end of the day the only economic power able to be exercised by workers is the ability to strike – in the absence of that right workers are forced to accept whatever handout an employer offers and whatever conditions of employment the employer determines. In the current health sector disputes it is not only remuneration that is at issue but also safe staffing levels and the threats to health sector workers posed by underfunding and understaffing.