NZ DAIRY WORKERS UNION INC V NZ MILK PRODUCTS LIMITED CA CA205/03

NZ DAIRY WORKERS UNION INC V NZ MILK PRODUCTS LIMITED CA CA205/03 29 June 2004IN THE COURT OF APPEAL OF NEW ZEALAND CA205/03IN THE MATTER OF of the Employment Relations Act 2000 BETWEEN NZ DAIRY WORKERS UNION INCORPORATED Appellant AND NEW ZEALAND MILK PRODUCTS LIMITED Respondent Hearing: 31 March 2004 Coram: Anderson P McGrath J Glazebrook J William Young J O'Regan J Appearances: R Harrison QC for Appellant G M Pollak for Respondent C Stewart as Amica Curiae Judgment: 29 June 2004JUDGMENT OF THE COURT DELIVERED BY GLAZEBROOK J Introduction[1] The NZ Dairy Workers Union has as members some 94% of the permanent employees of New Zealand Milk Products (NZMP) and some 36% of its temporary employees. The 2002-2003 Collective Agreement entered into between that Union and NZMP makes provision for a "bargaining agent's fee" to be paid by non-Union members whose terms and conditions of employment are determined wholly or substantially by the Collective Agreement.[2] The Union, in negotiating the bargaining fee provisions, was concerned with non-union members "free-riding" by benefiting from the terms and conditions negotiated by the Union without contributing to the costs of bargaining. The bargaining fee is set at 0.5% of an employee's gross taxable earnings. Although the bargaining fee has been set at a lower level than the Union fees, there has been no attempt to calculate the cost of providing bargaining services and to set the level of the fee accordingly. Union fees are 0.6% of gross taxable earnings. [3] The question for this appeal is whether the bargaining fee clause in the Collective Agreement and the related policy of NZMP regarding its implementation for non-Union workers are lawful.Agreed statement of facts[4] The parties filed an Agreed Statement of Facts in the Employment Court on 4 December 2002, two days before the hearing of the case. This updated an Agreed Statement of Facts that had been provided at the time the proceedings were filed. [5] The updated Agreed Statement of Facts began by indicating that the bargaining fee clause at issue, which had been a proposed clause only at the time of filing the proceedings, had now been included in the new Collective Agreement. The parties noted that the clause acknowledged that the matter was before the Employment Court and that they were awaiting a decision as to the lawfulness of the agreed clause. The relevant parts of the clause are as follows:14.5.1 This clause shall apply only to workers covered by the coverage clause (clause 2.3) of this agreement and who are not or do no[t] become members of the union, or who cease to be members of the union party to this agreement. 14.5.2 Where such a worker's terms and conditions of employment are determined wholly or substantially by this agreement, the worker shall pay to the union as the bargaining agent, a fee of .5% (50c per $100) of gross taxable earnings that will be earned during the unexpired term of the agreement. 14.5.2.1 Such payment will be paid as a lump sum within 14 days of accepting the agreement or ceasing to be a member, whichever is the case.14.5.2.2 The lump sum referred to in clause 14.5.2.1 above, may be paid fortnightly on the basis of .5% (50c per $100) of gross taxable earnings the worker is paid each fortnight while they remain employed in that position. Except the worker may revoke such authority within 14 days notice to the employer in writing. If the worker revokes the authorisation for such fortnightly deduction, then the employer shall deduct the balance of the lump sum from the workers pay, before revocation takes effect. 14.5.3 The company shall inform any worker employed by the company who is not a member of the union and whose terms and conditions of employment are so determined that the fee is payable. For new workers the fee shall not be payable until after the first 30 days of their employment. 14.5.4 The company shall deduct the bargaining fee from the workers wages or salary and remit it, along with a schedule of such deductions, to the union at monthly intervals. 14.5.5 It is understood by the parties that the provisions of this clause are before the Employment Court. Should there be any legal ruling against the validity of any part of this clause, both parties agree to negotiate a change to that specific part in order to comply.[6] The Agreed Statement of Facts then went on to refer to a policy adopted in relation to non-Union employees as a consequence of the entry into clause 14.5 in the Collective Agreement. It went on:The Defendant's longstanding practice is as follows: (i) Employees who are not members of the Plaintiff Union are employed on the same individual conditions of employment as those contained in the collective employment agreement. Those conditions are by way of an individual employment agreement. (ii) The Defendant [NZMP] intends to continue this practice in the future. (iii) The Defendant does not wish to prefer Union or non-Union members by offering terms and conditions of employment that are more advantageous or less advantageous to the other group of employees. (iv) The Defendant does and wishes to in the future treat all of its employees fairly, consistently and irrespective of Union membership. 5. To have differing terms and conditions of employment for dairy workers would be administratively and practicably unworkable, given the annualised hours, shift provisions and numerous other specific and unique features of the seasonal dairy industry and its production requirements.6. In the notice sent to all dairy workers the Defendant's policy has been articulated. 7. All employees who are not members of the Plaintiff Union have been and will be required to make an election: (i) If employees wish to have the terms and conditions contained in the applicable collective employment agreement either he or she must join the Plaintiff Union or provide notification to the Defendant that it is permitted to deduct the bargaining agents fee. The Defendant provides to each employee the required documentation.(ii) If an employee elects to not join the Plaintiff Union or is not agreeable to authorising the bargaining agents fee from his or her salary then the employee remains on his or her current individual employment agreement and such terms and conditions will apply until such time as an alternative agreement is reached between the individual employee and the Defendant. 8. There are a number of consequential issues that then arise as a result of the introduction of the bargaining agents fee: (i) Is the Defendant's policy unlawful? (ii) Irrespective of the Defendant's policy, does the bargaining agents fee contained in the collective employment agreement bind the Defendant to include it in any individual employment agreement where the employee's terms and conditions of employment are determined wholly or substantially by the applicable collective employment agreement? (iii) May the Defendant and an individual employee whose terms and conditions are the same or substantially the same as those contained in the applicable collective agreement agree to omit the bargaining agents fee clause in the individual employment agreement? (iv) If the Defendant agrees to individual employment agreements with employees who are not members of the Plaintiff Union and the terms and conditions of those agreements are substantially different from the terms and conditions contained in the collective agreement, does such an agreement constitute an unlawful preference, either of Union members or non-Union members?(v) Is the Defendant's policy contrary to Section 11(I) of the Employment Relations Act?NZMP policy[7] The NZMP policy referred to in the Agreed Statement of Facts is headed "Notice to all Dairy Workers who are not currently members of the Dairy Workers Union". It begins by referring to the proposed settlement of the Collective Agreement with the Union which included a base percentage increase of 3% and the introduction of a bonus scheme and went on to set out ratification procedures for the Agreement and suggested that workers talk to their manager if they did not understand the provisions of the Agreement. The policy then went on, under a heading "How does this affect you" as follows:The agreement that has been concluded is between the company and the Dairy Workers Union. It is not between the company and the workers. Automatic coverage of the agreement to workers is only by virtue of union membership. The company and the union have agreed however that the terms and conditions of the agreement may be extended to non-union members who are employed to do work broadly covered by the coverage clause of the agreement, in return for a bargaining agent's fee. If you are currently not a member of the Dairy Workers Union you are now required to make a choice. If you would like to be covered by the terms, conditions and benefits that have been agreed to in the NZMP Ltd Dairy Workers Collective Employment Agreement you need to either: 1. Join the Dairy Workers Union by completing the appropriate documentation to you from the site delegate or site administration, or 2. Complete the appropriate documentation (as attached) authorizing the company to deduct the bargaining agent's fee from your salary and forward it to your Site Manager asap. Note: For your information a copy of the bargaining agent's fee provisions contained in the agreement is detailed below. If you do not wish to join the Dairy Workers Union and you are not prepared to authorize the company to deduct the agreed bargaining agent fee from your salary you must advise your site manager of this fact in writing. If this is the case you will remain on your current individual terms and conditions as they currently apply to you until such time as you and the company agree on an alternative agreement. The choice is yours. If you have any queries contact your site HR advisor or site manager.[8] The policy statement then set out the then form of what became clause 14.5. It had two forms attached. The first was an authorisation form for the making of deductions relating to bargaining agent's fee and was in the following terms.AUTHORISATION FORM To be submitted to the site manager: I .. wish to advise the company that after due consideration it is not my intention to join the NZ Dairy Workers Union. I do however wish to have all of the applicable terms, conditions and benefits as provided in the NZMP Ltd Collective Agreement 2002-2003 apply to me with effect from the date of signing this authority. To this end I acknowledge that I understand that the signing of this authority form will permit the company to make deductions from my wages in line with the bargaining agent fee provisions detailed in clause 14.4.2 of the Collective Agreement. [now clause 14.5] Furthermore I understand that this authority will remain in force until revoked or amended by me in writing and that should I revoke this authorization a final deduction shall be made from my wages in accordance with the bargaining agent fee provisions as detailed in clause 14.4.2 of the Collective Agreement. [now clause 14.5] SIGNED . DATED .. (Workers full name) RECEIVED BY:. DATED .. (Site managers signature)[9] The second form was presumably to be signed if the worker was not prepared to authorise the deduction of the bargaining agent's fee and was in these terms:Confirmation of rejection of the provisions of the NZMP Ltd Collective Agreement 2002-2003 To be submitted to the site manager: I .. wish to advise the company that after due consideration I have elected not to take up the offer of having the terms, conditions and benefits as provided in the NZMP Ltd Collective Agreement 2002-2003 to apply to me. Accordingly I wish to confirm that I understand that this decision means that I will remain on my current terms and conditions (rates of pay etc) until suchtime as the company and I agree to changes to my individual employment agreement. SIGNED . DATED .. (Workers full name) RECEIVED BY:. DATED .. (Site managers signature)The decision of Judge Colgan in the Employment Court[10] The case was filed originally with the Employment Relations Authority in July 2002 as an employment relationship problem. At that stage the Collective Agreement had not been entered into and the issue was the lawfulness of the proposed bargaining agent's fee clause. [11] The matter was removed to the Employment Court on 18 September 2002 pursuant to s178 of the Employment Relations Act 2000 (ERA). The case came before Judge Colgan on 6 December 2002 with judgment given on 14 February 2003. Two days before the hearing the parties advised the Court that the clause was now included in a new Collective Agreement and also that the parties wished the Court to pronounce on the lawfulness of the NZMP policy relating to non-Union employees. Judge Colgan, with some reluctance, agreed to continue hearing the case. Ms Stewart, as amica curiae, was asked to represent all employees potentially affected by the policy. The Judge expressed the view that it was surprising that the parties could not have waited until the hearing, which had been given a priority fixture, before implementing the arrangements. [12] Judge Colgan began his discussion by saying that, in his view, the parties faced an unusual and in some ways difficult task. They had to establish that their intended (and now operative) courses of action are not unlawful. To do so, they had first to consider how it might be said that their intended courses of action are unlawful and then counter each of those theoretical arguments. [13] The Judge concluded that the bargaining agent's fee clause and related policy was unlawful under both the ERA and the Wages Protection Act 1983. The relevantprovisions of the legislation (as well as a number of the other provisions we refer to in the course of this judgment) are set out in the Appendix. [14] With regard to the Wages Protection Act, the Judge held that the arrangements breached both s4 and s12 of the Wages Protection Act and that they were not saved by s16 of that Act. This is because they purported to tell employees how to spend their wages. The Judge held that, although s16 may appear at first glance to permit an arrangement that would otherwise breach s12 if it is contained in a collective agreement, an otherwise unlawful provision cannot be made lawful simply by its inclusion in a collective agreement. [15] As regards the ERA, the Judge held that the arrangements breached s8 of the ERA. The Judge recorded that NZMP accepted that the requirement to pay the bargaining agent's fee is an inducement to non-union employees both to join the collective agreement and to become members of the union. Mr Pollak, on NZMP's behalf, had conceded, both with regard to s8 and s11, that:It cannot realistically be said that the purpose of the bargaining agents fee is not to exert pressure on the employee to agree to be covered by the collective employment agreement and become a member of the plaintiff.[16] In the Judge's view, the arrangements went beyond an incentive and amounted to compulsion and this offended both the principle of voluntary unionism and the legislative intention that there be no monopoly of trade union services. In coming to this conclusion, the Judge relied on an obiter comment of Randerson J inAir New Zealand Ltd v Kippenberger [1999] 1 ERNZ 390, 401 that an inducement may be set at such a high level that it would amount to compulsion. [17] The Judge held, however, that there was no breach of s9 of the ERA. He pointed to the inclusion of s9(2) which provides that there is no prohibited preference simply because an employee's employment agreement or terms and conditions are different from those of another employee employed by the same employer. The Judge considered that s9(2) is likely to be a very broad exemption in practice.[18] Judge Colgan then turned to s11 of the ERA and held that it was breached because the arrangement exerted undue influence on employees not to become a member of any union other than the Union. In his view, the requirement to pay the bargaining agent's fee would be a real and compelling disincentive to employees to join another union. [19] Finally, the Judge held that NZMP's insistence on the bargaining agent's fee clause being included in individual employment agreements amounted to unfair bargaining under s68(2)(c) of the ERA. More particularly, it would be conduct inducing such employees to enter into an individual agreement by undue influence and/or economic duress. [20] Judge Colgan concluded that the Collective Agreement and any individual agreements containing the bargaining agent's fee clause had no force, to the extent that the clause remained. He ordered the Union and NZMP to take steps not only to remove the clause but also to repay monies unlawfully deducted from employees' wages.Submissions of the Union[21] Mr Harrison QC, for the Union, first submitted that the Judge erred in treating the clause attached to the NZMP Policy (being an earlier version of clause 14.5) as the clause that was to be inserted into the individual employment agreements of non-union workers. That clause was not suitable for such inclusion and it was not intended that it be inserted. This had, in his submission, led the Judge into error when considering the Wages Protection Act as the Judge had overlooked the Authorisation form attached to the NZMP Policy. [22] Mr Harrison conceded that aspects of clause 14.5 would be unenforceable. He referred in particular to the provision for an up front lump sum, payable if the worker left or was dismissed and representing the bargaining agent's fee calculated over the entire unexpired term of the collective agreement. He accepted that this provision contained unacceptable penal elements. He informed the Court that the Union and NZMP have now agreed on a "watered down" clause appropriate forinclusion in individual employment contracts. He submitted that it is this clause that should now be considered. The new clause reads as follows:Bargaining LevyX. 1 Where the employee's terms and conditions of employment are based wholly or substantially on the NZMP Dairy Workers Collective Agreement 2002-2003 or on any collective agreement subsequently entered into between the parties to that agreement (in either case referred to as "the collective agreement"), the employer shall deduct the bargaining levy referred to in clause X.2 from the employee's fortnightly remuneration as and when the same shall become payable to the employee. X.2 The bargaining levy shall amount to .5% (50c per $100) of the employee's gross taxable earnings for the fortnightly remuneration period in question. X.3 The employer shall upon deduction pay and remit the bargaining levy to the New Zealand Dairy Workers Union as provided for in the collective agreement. X.4 The employee requests and consents to the deduction of the bargaining levy from his or her remuneration and its payment by the employer to the New Zealand Dairy Workers Union. X.5 Where the employee is a new employee within the meaning of section 62 of the Employment Relations Act 2000, this clause shall only take effect following the expiration of the first thirty days of the employee's employment with the employer. X.6 This clause shall continue in force notwithstanding the expiration of the term or terms of the collective agreement.[23] Mr Harrison submitted that Judge Colgan erred in holding that the proposed arrangements breached ss4 and 12 of the Wages Protection Act, and were not saved by s16 of that Act. He argued that s12 was not intended to prohibit all forms of deduction from wages but was instead intended to prevent employers from inducing workers to spend their wage at a particular place or in a particular manner. It does not, in his submission, operate where there is deduction at source - see Davies v Dulux NZ Ltd [1986] 2 NZLR 418, 421-422, 427. In that case s5(1) applies. In Mr Harrison's submission, either the proposed bargaining levy clause or the "authorisation form" annexed to the NZMP Policy, would constitute sufficient authority to make deductions for the purposes of s5(1). Mr Harrison recognised, however, that the employee then has the right to revoke that authorisation under s5(2).[24] Further, Mr Harrison submitted that the Judge erred in holding the arrangements were not saved by s16. This is because the proposed arrangements are pursuant to and in compliance with a provision of a collective agreement, namely clause 14.5. In his submission, the language of s16(a) is broad enough to cover this, and there is no warrant for limiting the purpose of s16 (as Judge Colgan did) to deductions from the wages of employees employed pursuant to the collective agreement in question. [25] Mr Harrison next submitted that the Judge erred in holding that the proposed arrangements breached s8 of the ERA because they interfere with the freedom of association of employees who choose not to join the Union. He argued that the arrangements are in fact the antithesis of formal membership of the Union. In Mr Harrison's submission, the protection in the ERA is limited to ensuring that no employee is compelled to take up formal membership of a union. At most Mr Harrison submitted that the proposed arrangements provide individual non-union employees with a behavioural incentive to join and remain a member of the Union. In his submission, "practical compulsion" by reason of benefits or disbenefits flowing naturally from an impugned contract, agreement or other arrangement is not what s8 ERA is concerned with. [26] Mr Harrison also submitted that the Judge's conclusion that there was a legislative intention that there be no monopoly on union services was not founded in the ERA. In his submission, the ERA does not seek to regulate the relationship between rival unions. Relations between rival unions are a noteworthy omission from the list of "good faith employment relationships" in s4(2) of the ERA. The ERA therefore in no way seeks to create a "level playing field". [27] Mr Harrison also submitted that s8 is a companion provision to s11. Together they operate to prohibit the use of contractual and comparable other arrangements to require union membership (s8), and undue influence directed at inducing union membership (s11). It is clear in his submission that, short of a "requirement" or of undue influence, there exists both employer and trade union freedom of action in relation to inducements to join (or not to join) a trade union.[28] Mr Harrison next submitted that the Judge erred in finding that the arrangements breach s11 of the ERA, in the absence of evidence as to conduct. He argued that the Judge made a finding of undue influence on the basis that there is an economic incentive to join the union. The creation of incentives, in his submission, cannot amount to undue influence. In any event, it was submitted that the Court should decline to rule on this point (either way) unless and until the question arises in the context of a particular case. Mr Harrison conceded, however, that the Judge was led into dealing with this issue by the manner in which the parties had framed the case before him. [29] Finally, Mr Harrison submitted that Judge Colgan erred in finding that the arrangements breached s68(2)(c) of the ERA for the same reasons that he had erred in relation to s11. He also pointed to the terms of s164 of the ERA which requires an attempt at mediation before any remedy is given. In addition, it was submitted that s68 does not characterise the outcomes of particular forms of bargaining as unlawful, only as "unfair", with specific and exhaustive remedies set out in s69. Further, Mr Harrison submitted that there are differences in the ERA between individual and collective bargaining with the ERA promoting the former and s68 providing only very restricted grounds for challenging an individual employment agreement.Submissions of the NZMP[30] NZMP agreed to take a neutral stance in the proceedings pursuant to a Record of Understanding entered into with the Union. The role of NZMP in the proceedings has been to provide the relevant information so that the legality of the clause can be determined. [31] In this Court, however, NZMP departed from the view of the Union as regards the impact of the change to the clause in the individual employment agreements. It submitted that there is little or no difference between an individual agreeing to this clause and an individual agreeing to the clause that was before the Employment Court. In the opinion of NZMP, this change does not provide a basis for the case to be referred back to the Employment Court.[32] NZMP also departed from the submissions of the Union with respect to s11 of the ERA. It was submitted that the Judge did not err in making findings on the issue of undue influence. In its submission, these findings were not made in the absence of evidence as to conduct as it was self-evident that some employees might object to the bargaining agent's fee clause and that non-union employees would be strongly influenced to agree to it. [33] NZMP also disagreed with the Union's contention that the Court needed specific evidence of an employee who wished to join another union before it could make a finding on s8 of the ERA. Again NZMP viewed the possibility of such a situation as self-evident. Similarly, NZMP argued that the question of unfair bargaining considered by the Employment Court would have arisen inevitably. [34] Finally, NZMP noted that bargaining fee clauses in Australia have now been made unlawful by statute and that the issue is also being considered in New Zealand in the Employment Relations Law Reform Bill. Mr Harrison, on the other hand, submitted in reply that this Bill deals with an entirely different issue from that before the Court.Submissions of the amica curiae[35] In the Employment Court as in this Court, Ms Stewart has been appointed as amica curiae to represent the interests of those employees, both present and future, who do not choose to join the Union. [36] As a general introduction, Ms Stewart provided a summary of the circumstances giving rise to "free riding" and the problems presented by it. She said that one of the inescapable consequences of freedom of association is that in many workplaces union and non-union employees work alongside one another performing the same duties. This situation creates an issue for employers and a common response is to adopt a policy whereby terms and conditions for union and non-union employees are kept the same. This is the preferred outcome for NZMP in this case. Reasons for such a preference include reduced administrative costs, the avoidance of morale issues in situations where two employees performing the same role earndifferent remuneration and a desire not to be seen as favouring either union or non-union employees. [37] She accepted that this can lead to a feeling that non-union members are free riding and thus to a perception of inequity amongst union members. The Union's contention that a proportion of union fees is attributable to the bargaining service provided to members must in her submission be correct, although quite what the proportion of this to total union fees is unclear. She pointed out that, while the principal role of a union may be collective bargaining, there are a number of other benefits available to a union's members which are not available to non-union members including educational, charitable and welfare funds for members. Ms Stewart noted that, although the bargaining agent's fee had been set at 0.5% of a non member's gross earnings, there had been no evidence presented to demonstrate that this reflected the cost to the union of wage negotiations, relative to their other activities. [38] Ms Stewart also referred to the provisions of the Employment Relations Law Reform Bill currently before the Transport and Industrial Relations Select Committee. The Bill would make it a breach of an employer's duty of good faith to pass on the benefit of union negotiated collective agreements to non-union members if this is done with the intention of undermining a collective agreement and the effect is to undermine that collective agreement. Ms Stewart recognised that the Bill would not impact on the legality of a bargaining fee for non-union members. However, she submitted that the Bill demonstrates that Parliament considers that the most effective means of addressing the concern of "free riding" is through legislation. [39] Ms Stewart next submitted that the transcript of the Employment Court hearing showed that Judge Colgan was correct in relying upon clause 14.5 as being the clause to be included in individual employment agreements because counsel for NZMP had stated that this would be the case. If there was now a new clause she suggested it may be more appropriately considered in the Employment Court. [40] Turning to the Wages Protection Act, Ms Stewart submitted that the intention and purpose of that Act is to provide the employee with the choice as to if, when andhow deductions will be made from his or her regular wage by the employer. It is not a requirement of the clause in the collective agreement that the employer first obtain the consent of the non-union employees before making these deductions. In her submission, this breaches s5 of the Wages Protection Act. While the signing of an authorisation form may appear on the surface to amount to consent and a compliance with s5, if the employee revokes the employer's "authorisation" to deduct the fee, a lump sum will be deducted from the employee's wages under cl 14.5.2.2 before revocation becomes effective. The employee therefore has no true choice but to pay the fee. [41] In addition, by advising potential employees that, unless they agree to the deduction they will not be offered employment and by advising existing employees that, unless they agree to the deduction, they will not receive further benefits (eg wage increases) the employer is, in her submission, in effect taking away the employees' ability to choose whether the employer can make deductions from their wages. The potential or existing employee has a Hobson's choice. They agree to the deduction and get the benefits, or, they do not agree and, because of that refusal, get nothing. The employer could be seen as imposing a requirement on the employee as to how the employee will spend some of their wages. This, in her submission, would amount to a breach of s12. [42] The breaches of the Wages Protection Act, in her submission, mean that clause 14.5 is contrary to law and therefore that it breaches s54(b) of the ERA. [43] With respect to s8 of the ERA, Ms Stewart submitted that the issue is whether the word "require" is to be given a narrow meaning, as advanced by the Union, or the wider meaning applied by the Employment Court. She submitted that the effect of requiring non-union members to pay a fee marginally lower than that paid by union members could in a practical sense compel these workers to join the Union. The arrangements may also have the practical effect of preventing employees from joining another union as they would effectively need to pay two sets of union fees. She accepted that "union contestability" is not expressly addressed in the ERA. However, she submitted that the freedom to choose whether to be members of a union implicitly includes the freedom to choose which union to join. Requiringnon Union workers to continue to pay a levy, regardless of whether they join another union and are covered by another collective agreement or otherwise, there is a reduced likelihood that such employees will join another union. Ms Stewart therefore argued that the arrangements breach s8 of the ERA. [44] Ms Stewart also addressed s11 of the ERA. She submitted that the issue for determination on this point is whether the arrangements directly or indirectly amounted to improper exploitation of inequality between the employer and employee. Given that the payment of the bargaining fee is linked to the increase of remuneration and benefits, Ms Stewart argued that the employer's conduct amounted to improper exploitation of recognised inequality in bargaining power. It is reasonable in her submission to assume that non-union employees faced with the option of not paying the bargaining fee and not receiving any improved benefits (including a wage increase), or paying the fee and receiving the benefits, will choose the latter. Furthermore, a non-union employee faced with the choice of payment of the bargaining agent's fee or a union membership fee might justifiably consider that it is more attractive to join the Union and pay the union fee. There was information before the Employment Court that suggested that this had occurred. Payment of the Union fee brings tangible membership benefits. Payment of the bargaining fee, on the other hand, does not bring benefits which are definable in any accurate or tangible manner. [45] With respect to the issue of unfair bargaining under s68(2)(c) of the ERA, Ms Stewart noted that there was evidence before the Employment Court that employees had started paying the fee and had then decided to join the Union. In her submission, this provided a sufficient basis for the Court to make a finding on the issue. [46] As a further point, she submitted that an employer binding itself in advance that it will not negotiate with regard to the bargaining fee and thus determining the outcome before the process is entered into could cause difficulties with the good faith obligations of employers. There must be a requirement at least to hear what the employee has to say before making a final determination.[47] Finally, she submitted that the clause amounted to unilateral variation of employment terms for those who resigned from the Union and for new employees who did not choose to join the Union after the first 30 day period. As the fee in clause 14.5 would apply to them and not Union members, their terms were no longer the same as Union members covered by the Collective Agreement. This, in her submission, is in breach of ss61 and 63 of the ERA.Section 9 of the Employment Relations Act 2000[48] The Judge's finding on s9 of the ERA was not the subject of appeal, for the obvious reason that the Union considered it correct, NZMP was taking a neutral stance and Ms Stewart as amica curiae was not in a position to raise it as a point on appeal. Understandably, no counsel had prepared submissions on the point. [49] Ms Stewart, however, at our request, outlined the position she had taken before the Employment Court. This was that there was a preference because the bargaining agent's fee was not calculated merely to cover the bargaining services. This meant that there was a tangible benefit to Union members not available to non-Union members. In addition, for non-Union members, the payment of the bargaining fee is not a free choice as it is tied to better terms and conditions. For new employees the choice is starker. They must accept the fee or not be employed. Under s9 there must be a causal link between membership of a union and the differential but that link is present here. [50] Mr Harrison briefly dealt with this matter before us by submitting that the Judge's decision was correct. Further, he submitted that in s9 a preference means a preference and not a disadvantage. Disadvantages are dealt with elsewhere in the ERA in the s103 personal grievance provisions. Further, he submitted that it was not for the Court to consider whether the level of the bargaining agent's fee represents "value for money", and that, so long as the level of the bargaining fee is lower than that of the comparable union membership fee, no issue of prohibited preference arises.Discussion[51] As a preliminary point, we consider that we should determine this appeal on the basis of what was before the Employment Court, that is clause 14.5 of the Collective Agreement and the NZMP Policy. We have not, therefore, examined the new clause the Union puts forward. [52] We turn now to the Wages Protection Act. We accept Mr Harrison's submission that, pursuant to s5(1)(a), amounts can be deducted from an employee's wages if he or she consents in writing to the deduction. There is an authorisation form attached to the NZMP policy and this, prima facie, would meet that requirement, if it were signed by an employee. However, it is clear from s11(1)(a)(ii) of the Wages Protection Act that any consent obtained by duress is not a true consent. Taking into account the scheme and purpose of the Wages Protection Act, we consider this means that any consent must be freely given and not as a result of improper exploitation of inequality in bargaining power. As improved terms and conditions are unavailable for non-Union members without signing the authorisation, it may be that this requirement would not be satisfied. We do not consider, however, that we can determine this issue in the abstract. [53] We consider that it would, in any event, be incumbent on NZMP to inform employees that they could withdraw their consent under s5(2) of the Wages Protection Act and that NZMP would then be obliged to cease the deduction within two weeks if practicable. The NZMP Policy does not provide for this. [54] We also note that, if an employee did revoke his or her consent to the deductions, clause 14.5 envisages that the fee would continue to be payable on a fortnightly basis (and in a lump sum if the employee leaves NZMP's employment). Mr Harrison conceded that the lump sum would constitute a penalty. We think that, as such, it is at best unenforceable and, in the context of an employment contract, recoverable by an employee. He also conceded that the fortnightly payments could not be required in the absence of written authorisation, without breaching s12 of the Wages Protection Act.[55] Finally on this point we do not consider that the arrangement is saved by s16 of the Wages Protection Act. It is true that clause 14.5 is included in a collective agreement. The scheme of the Wages Protection Act is that no deductions from wages can be made without written consent from the employee. It cannot be in accordance with that scheme for the requirement for consent to be overridden by a collective agreement that the employee cannot be seen as having consented to in any way. Indeed clause 14.5 only applies to those who are not bound by the collective agreement. In our view, s16 applies only to deductions authorised by the collective agreement which governs the employment relationship between the employer and employee in question. [56] We, therefore, consider that Judge Colgan was correct to hold that clause 14.5 breached s12 of the Wages Protection Act and that s16 did not save it. The NZMP Policy is, as a consequence, also unlawful. Judge Colgan may also have been correct with regard to the arrangement breaching s4 of the Wages Protection Act, but whether that is so or not would depend on the factual circumstances and so a definitive answer on this cannot be given. [57] We now turn to the Judge's finding on s8 of the ERA. In this regard, we accept Mr Harrison's submission that s8 prohibits the imposition of a requirement to become a union member. We would not rule out the possibility that a requirement for non-union members to pay money to the union could amount to "practical compulsion" to join or remain a member of a union in breach of s8. Usually, however, issues of practical compulsion would appear to be the province of s9 or s11 of the ERA. Whether any such requirement amounts to practical compulsion in breach of s8, rather than merely an incentive to join or remain a member of the union, will, however, depend on the factual circumstances. In this case, the penal element involved (with the lump sum requirement) may amount to practical compulsion. We do not, however, have enough information to make any definitive finding. [58] For s11 to apply, there must be undue influence exerted and with the intention of inducing a person to become or remain a member of a union. It follows that there is nothing wrong with exerting influence, unless it is undueand has the requisite intent. These appear to us intensely factual issues and not ones that can be determined in a hypothetical manner on the Agreed Statement of Facts that was before the Employment Court. Thus we accept Mr Harrison's submission that the Judge should not have made the findings he did on s11. The same applies even more strongly to the findings regarding s68(2)(c), given the requirement for mediation set out in s164. [59] We do not need to deal with Ms Stewart's other submissions as to whether an employer can bind itself in advance not to negotiate or the suggested difficulties with ss61 and 63 of the ERA. Nor do we need to deal with the arguments relating to union contestability. We would remark, however, that, although we do not have the s9 question before us, we are not to be taken as necessarily being in agreement with the Judge's finding in that regard. [60] We make one final comment. It does not appear that these proceedings were drawn to the attention of the non-unionised workers at NZMP (who were clearly affected by them). In our view, they should have been so that these workers had the opportunity of becoming involved directly if they wished.Result and costs[61] We have upheld Judge Colgan's findings that the NZMP Policy is unlawful, although not all his reasons for making that finding. The appeal is accordingly dismissed. [62] There is no order for costs as between the parties. [63] It has been agreed that Ms Stewart's costs will be met in the first instance by the Crown. It would seem to us, however, that it may be appropriate for the parties to reimburse the Crown for Ms Stewart's costs and disbursements – see s99A of the Judicature Act 1908. The parties have leave to file any submissions on this point on or before 13 July 2004.Solicitors: Bogers Scott & Shortland, Hamilton for Appellant G M Pollak, Auckland for Respondent Kiely Thompson Caisley, Auckland for Amica CuriaeAPPENDIX RELEVANT LEGISLATION WAGES PROTECTION ACT 19834 No deductions from wages except in accordance with ActSubject to sections 5(1) and 6(2) of this Act, an employer shall, when any wages become payable to a worker, pay the entire amount of those wages to that worker without deduction.5 Deductions with worker's consent(1) An employer may, for any lawful purpose,— (a) With the written consent of a worker; or (b) On the written request of a worker— make deductions from wages payable to that worker. (2) A worker may vary or withdraw a consent given or request made by that worker for the making of deductions from that worker's wages, by giving the employer written notice to that effect; and in that case, that employer shall— (a) Within 2 weeks of receiving that notice, if practicable; and (b) As soon as is practicable, in every other case,— cease making or vary, as the case requires, the deductions concerned.11 Worker may recover wages(1) Subject to subsections (2) and (3) of this section, a worker may recover from that worker's employer, by action in the Employment Relations Authority, established by the Employment Relations Act 2000, in the prescribed manner— (a) Any deduction made (otherwise than pursuant to section 6 of this Act) by that employer from wages that have been paid, or but for that deduction would have been paid, by that employer to that worker, if— (i) That deduction was not consented to, or requested by, that worker in writing; or (iii) The making of that deduction was consented to, or requested by, that worker in writing; but the consent or request concerned was obtained by threat of dismissal, or otherwise by duress:12 Employer not to stipulate as to mode of spending wagesNo employer shall impose any requirement on any worker as to any place or manner in which or any person with whom that worker shall expend wages received by that worker, or dismiss any worker on account of any place or manner in which or any person with whom that worker expends those wages.16 Provisions in collective agreementsSubject to section 6(2), nothing in this Act derogates from or makes it unlawful to comply with— (a) any provision of any collective agreement within the meaning of the Employment Relations Act 2000; or (b) any provision of any order of the Employment Court or the Employment Relations Authority established by the Employment Relations Act 2000.EMPLOYMENT RELATIONS ACT 2000Part 3 Freedom of Association 7 Object of this PartThe object of this Part is to establish that— (a) employees have the freedom to choose whether or not to form a union or be members of a union for the purpose of advancing their collective employment interests; and (b) no person may, in relation to employment issues, confer any preference or apply any undue influence, directly or indirectly, on another person because the other person is or is not a member of a union.8 Voluntary membership of unionsA contract, agreement, or other arrangement between persons must not require a person— (a) to become or remain a member of a union or a particular union; or (b) to cease to be a member of a union or a particular union; or (c) not to become a member of a union or a particular union.9 Prohibition on preference(1) A contract, agreement, or other arrangement between persons must not confer on a person, because the person is or is not a member of a union or a particular union,— (a) any preference in obtaining or retaining employment; or (b) any preference in relation to terms or conditions of employment (including conditions relating to redundancy) or fringe benefits or opportunities for training, promotion, or transfer. (2) Subsection (1) is not breached simply because an employee's employment agreement or terms and conditions of employment are different from those of another employee employed by the same employer.10 Contracts, agreements, or other arrangements inconsistent with section 8 or section 9A contract, agreement, or other arrangement has no force or effect to the extent that it is inconsistent with section 8 or section 9.11 Undue influence(1) A person must not exert undue influence, directly or indirectly, on another person with the intention of inducing the other person— (a) to become or remain a member of a union or a particular union; or (b) to cease to be a member of a union or a particular union; or (c) not to become a member of a union or a particular union; or (d) in the case of an individual who is authorised to act on behalf of employees, not to act on their behalf or to cease to act on their behalf; or (e) to resign from or leave any employment on account of the fact that the other person is or, as the case may be, is not a member of a union or of a particular union. (2) Every person who contravenes subsection (1) is liable to a penalty under this Act imposed by the Authority.Part 6 Individual Employees' Terms and Conditions of Employment 60 Object of this PartThe object of this Part is— (a) to specify the rules for determining the terms and conditions of an employee's employment; and(b) to require new employees, whose terms and conditions of employment are not determined with reference to a collective agreement, to be given sufficient information and an adequate opportunity to seek advice before entering into an individual employment agreement; and (c) to recognise that, in relation to individual employees and their employers, good faith behaviour is— (i) promoted by providing protection against unfair bargaining; and (ii) consistent with the implied term of mutual trust and confidence in the relationship between employee and employer.68 Unfair bargaining for individual employment agreements(1) Bargaining for an individual employment agreement is unfair if— (a) 1 or more of paragraphs (a) to (d) of subsection (2) apply to a party to the agreement (person A); and (b) the other party to the agreement (person B) or another person who is acting on person B's behalf— (i) knows of the circumstances described in the paragraph or paragraphs that apply to person A; or (ii) ought to know of the circumstances in the paragraph or paragraphs that apply to person A because person B or the other person is aware of facts or other circumstances from which it can be reasonably inferred that the paragraph or paragraphs apply to person A. (2) The circumstances are that person A, at the time of bargaining for or entering into the agreement,— (c) is induced to enter into the agreement by oppressive means, undue influence, or duress; or (3) In this section, individual employment agreement includes a term or condition of an individual employment agreement.69 Remedies for unfair bargaining(1) If a party to an individual employment agreement is found to have bargained unfairly under section 68, the Authority may do 1 or more of the following things: (a) make an order that the party pay to the other party such sum, by way of compensation, as the Authority thinks fit: (b) make an order cancelling or varying the agreement: (c) make such other order as it thinks fit in the circumstances.(2) The Authority must not make an order under subsection (1)(b) unless the requirements in section 164 have been met, and that section applies accordingly with all necessary modifications164 Application to individual employment agreements of law relating to contractsWhere the Authority, has, under section 69(1)(b) or section 162, the power to make an order cancelling or varying an individual employment agreement or any term of such an agreement, the Authority may make such an order only if— (a) the Authority (whether or not it gave any direction under section 159(1)(b) in relation to the matter)— (i) has identified the problem in relation to the agreement; and (ii) has directed the parties to attempt in good faith to resolve that problem; and (b) the parties have attempted in good faith to resolve the problem relating to the agreement by using mediation; and (c) despite the use of mediation, the problem has not been resolved; and (d) the Authority is satisfied that any remedy other than such an order would be inappropriate or inadequate.