Misleading unions a costly mistake

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Employers need to take care when engaged in collective bargaining, as evidenced by a recent ERA case in which a charitable trust, Pact, was pinged with $10,000 in fines.

Pact, whose employees care for people with disabilities, began negotiations with the two unions representing its staff, the Public Service Association (PSA) and the Service and Food Workers Union, in early April 2011. The collective employment agreement (CEA) was due to expire at the end of the month and needed to be renewed. Having received a 1% increase in funding over the previous year, Pact offered the same pay increase to unionised employees.

Bargaining stalled, but at mediation in November all parties agreed to a 2% pay increase dated from November 4. The following January, Pact offered the same wage increase to all non-union employees back-dated to July.

The unions took a case against Pact to the ERA arguing that they had conferred an illegal preference on non-union employees by back-dating their pay further, and that Pact had breached its duty of good faith under section 4(1)(b) of the Employment Relations Act 2000 (the Act).

A prohibited preference, under section 9 of the Act, is one that is conferred based on the person’s membership (or lack thereof) to a union.  Motives are irrelevant; only the facts are to be considered.

“The reason Pact back-dated the non-union member employees wage increase to July was simply because it had always done so for its employees that were not covered by the collective agreement,” Hickey wrote. What distinguished these employees from those covered by the CEA was union membership, so the preference was prohibited.

The applicants also alleged that Pact had breached its duty of good faith under section 4(1)(b) of the Act, and Hickey agreed. When they began bargaining, Pact already knew that it would offer the resulting pay increase to non-union members, but back-dated to July. “Withholding that information at the same time as insisting that any pay increase must be within 1% over a 12-month period…was likely to mislead the unions into thinking that the non-union member employees would not receive any greater amount of back-pay,” Hickey explained.

Hickey called the breach ‘deliberate, serious and sustained’ and the effects of it deleterious to the unions. She awarded a penalty of $5,000 in addition to an identical penalty for a separate breach of the CEA. Richard Wagstaff of the PSA has called the decision ‘significant’ and a ‘warning’ to other employers. “It sends a strong message that employers cannot get away with giving preferential treatment to non-union members,” he said.

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