Observation (CEACR) - adoptée 1997, publiée 86ème session CIT (1998)

Convention (n° 26) sur les méthodes de fixation des salaires minima, 1928 - Nouvelle-Zélande (Ratification: 1938)

The Committee notes the detailed information supplied in the Government's report in reply to its previous comments. It also notes the comments made by the New Zealand Council of Trade Unions (NZCTU) concerning the application of this Convention and Convention No. 99, as well as the Government's response to these observations.

The participation of the employers and workers concerned in the operation of the minimum wage fixing machinery

1. The Committee notes that section 4 of the Minimum Wage Act, 1983, provides that the Governor-General may from time to time prescribe the minimum rates of wages payable to workers, or class(es) of workers as defined by age. Section 5 of the same Act provides that the Minister of Labour should annually review the minimum wage. However, according to the Government, it is now established in New Zealand for the Minister of Labour to write to the New Zealand Council of Trade Unions as a central representative for employees, and the New Zealand Employers' Federation as a central representative for employers, advising them that the review is taking place and seeking submissions from them. The Minister considers their submissions and onus from other organizations as part of the review before making his or her recommendations.

2. According to the NZCTU, the principle underlying the Minimum Wage Fixing Machinery Conventions is that such machinery should be implemented and operated through consultation between the government and employers' and workers' organizations. The Union considers that the Government's policy and practice is in breach of this principle for the following reasons: (i) the Minimum Wage Act was passed in 1983 without a formal tripartite consultation process between the government, employers and unions; (ii) although the Minimum Wage Act requires the Minister of Labour to review the minimum wage each year, it does not specify the purpose of that review or set a criteria against which the minimum level is to be assessed. The review is generally conducted in an arbitrary manner. Neither the Act nor any ministerial statement has a definition of the purpose of the minimum wage or criteria against which the review is to be conducted. In addition, there is no consultation process with employers and unions apart from a written submission process. Unions have no special role or function in the Minister's decision-making process.

3. In reply to the NZCTU's comments, the Government states that Article 2 of the Convention states that each Member shall be free to decide, "after consultation with the organizations, if any, of workers and employers" in the trades concerned, in which trades the minimum wage fixing machinery should be applied. The Minimum Wage Act, 1983, was introduced following the normal legislative process in New Zealand. A key component of that process is the role of the parliamentary select committee, which receives submissions on proposed legislation from individuals and organizations. The NZCTU, along with employers and all other interested parties, would have had the opportunity to comment on the proposed legislation as part of the process. With regard to the minimum wage consultation process, the Government states that it gives full and careful consideration to a wide range of factors in the review process, including the submissions which it has in the past customarily sought from the NZCTU and the New Zealand Employers' Federation, as well as any other submissions it may have received. The decision-making process is also subject to judicial review by the courts.

4. As concerns the purpose or criteria of assessment of the level of the minimum wage, the Government states that the Minimum Wage Act does not specify the criteria for the annual minimum wage review and the level at which the minimum wage is set. A thorough consideration is given by the Government to all relevant factors in the review process. Criteria for previous reviews have included: (i) the role of the minimum wage as part of the minimum code of employment; (ii) the relationship between minimum wage rates and the levels of employment and unemployment; (iii) on-the-job training; (iv) incentives for enrolment in education and training programmes; and (v) the economy in general.

5. The Committee recalls that one of the essential obligations of the minimum wage instruments is that the minimum wage fixing machinery must be set up and operated in consultation with organizations of employers and workers, who must participate on an equal footing. As specified in paragraph 190 of its 1992 General Survey on minimum wages, this obligation to consult the organizations of employers and workers concerned should be carried out at different times. Initially, it should be done at the time of determining the scope of the minimum wage to be established. Second, it should be applied during the operation of the minimum wage fixing machinery. Furthermore, in paragraphs 42 and 44 of its 1982 General Survey of the reports relating to Convention No. 144 and Recommendation No. 152 on tripartite consultation, the Committee considered the meaning of the term "consultation". It stated that "consultation" has a different connotation from mere "information" and from "co-determination". It also pointed out that the views expressed in the course of consultations were not a form of participation in decision-making , but simply one stage in the process of reaching a decision. It went on to say that "consultation must be able to have some influence on the decision". In addition, paragraph 195 of the 1992 General Survey on minimum wages specifies that the consultation referred to in the minimum wage instruments implies that employers and workers, their representatives or those of their organizations be able to have a real influence on the decisions to be taken.

6. In consideration of the above, the Committee requests the Government: (i) to provide information as to the consultation process followed in accordance with Article 3, paragraph 2(1), of the Convention; (ii) to specify to what extent employers and workers concerned are associated in equal numbers and equal terms in the operation of the minimum wage fixing machinery, in accordance with Article 3, paragraph (2); and (iii) to indicate the results of consultations of employers and workers concerned in the determination of minimum wages.

The minimum wage for young workers

7. The Committee notes that section 4 of the Minimum Wage Act 1983 provides that the Governor-General may from time to time prescribe the minimum rates of wages payable, inter alia, to class(es) of workers as defined by age. For instance, the Minimum Wage Order 1997 , which is currently in force, provides for different minimum rates for workers aged 16 to 19 years and for workers aged 20 years and upwards. In each class of workers, as defined by age, three categories of rates are provided according to the following cases: (a) if the worker is paid by the hour or piecework (for workers aged 16 to 19: NZ$4.20 or an equivalent amount having regard to the rate of production of the worker (in lieu of NZ$7, if the workers are aged 20 and upwards)); (b) if the worker is paid by the day (for workers aged 16 to 19: NZ$33.60 for each day plus NZ$4.20 for each hour in excess of eight worked by the worker on each day (in lieu of NZ$56 and NZ$7, respectively, if the workers are aged 20 and upwards)); (c) in all other cases (for workers aged 16 to 19: NZ$168 for each week plus NZ$4.20 for each hour in excess of 40 worked by the worker in each week (in lieu of NZ$280 and NZ$7, respectively, if the workers are aged 20 and upwards)).

8. The Government states that a minimum wage for employees aged 16-19 came into effect on 31 March 1994, following its decision to introduce a youth minimum wage. The youth minimum wage was set at a level that was 60 per cent of the adult rate.

9. The Committee refers to paragraphs 169 to 181 of its 1992 General Survey on minimum wages. Although minimum wage instruments contain no provisions providing for the fixing of different minimum wage rates on the basis of criteria such as sex, age or disability, the general principles laid down in other instruments have to be observed, and particularly those contained in the Preamble of the Constitution of the ILO which specifically refers to the application of the principle of "equal remuneration for work of equal value". As regards age, paragraph 171 of the above Survey specifies that the quantity and quality of work carried out should be the decisive factor in determining the wage paid. Therefore, the Committee considers that, although the minimum wage Conventions do not forbid the determination of lower minimum wage rates for young workers, the measures in this respect should be taken in good faith and should incorporate the principle of equal remuneration for work of equal value; the reasons that prompted the adoption of lower minimum wage rates for groups of workers on account of their age and disabilities should be regularly re-examined in the light of this principle.

10. The Committee requests the Government to provide information on the grounds for fixing the youth minimum wage at a level that is 60 per cent of the adult minimum wage.

The general application of the Minimum Wage Act

11. The Committee notes the Government's statement that the Department of Labour's inspectorate has the statutory power to enforce the Minimum Wage Act by initiating proceedings for recovery of wages on behalf of a worker. If necessary, a labour inspector will take a claim free of charge to the employment tribunal and may also seek an order for penalties against the employer. The great majority of labour inspectorate investigations, however, are resolved without recourse to tribunal proceedings. Workers (or their representatives) are also themselves able to bring claims against any employer who breaches the Minimum Wage Act. Employees in New Zealand, therefore, have a choice between initiating proceedings themselves or asking the labour inspectorate to pursue a claim on their behalf. The employment tribunal considers claims of breaches of the Minimum Wage Act brought by either the labour inspector or workers. Appeals of tribunal decisions are heard by the employment court. Under the Limitation Act, 1950, proceedings must be brought within six years of the breach of the Minimum Wage Act.

12. With respect to information on minimum wage, there are, according to the Government, a number of sources available for both employers and workers as to minimum wage rates. When a new minimum wage order is issued, it is published in the Gazette, an official publication which provides information about regulations that are to come into effect. The new rates are also publicized through press releases and direct mailing to employees' organizations, employers' organizations and interested community groups. The Department of Labour's industrial relations service provides information on the minimum wage and other statutory conditions of employment in a range of pamphlets which are widely available through the department, citizens advice bureaux and other interested organizations. The service operates a toll-free telephone information line which provides employees and employers with information on all industrial relations matters, including minimum wage rates. Labour inspectors also perform a general education role, providing information and speaking to interested organizations and individual employees and employers about their employment rights and obligations.

13. The Government also provides figures on the number of inquiries and alleged breaches submitted to the labour inspectorate over the reporting period (July 1992 to March 1997), as well as the number of minimum wage actions brought before the employment tribunal over the same period. According to the Government, the increase in the number of inquiries submitted to the labour inspectorate over the reporting period (from 4,932 between July 1992 and June 1993 to 7,550 between July 1996 and March 1997) is largely due to the introduction of information and education initiatives by the labour inspectorate, in particular the national toll-free telephone information line.

14. However, according to the NZCTU, the Government has adopted a "hands off" policy in the enforcement of the minimum wage, thereby placing the onus on the individual. The labour inspectorate does not inspect wage and time records on its own volition and will not respond to anonymous complaints by employees, rarely seeks recoveries of underpayments when they have been detected and does not prosecute offending employers with a view to having criminal penalties imposed on them. This means that there is a risk that violations go unreported and undetected, with complainants fearing retribution if they are identified. Often complaints are only made in extreme circumstances, or when an employee is about to leave his/her job. This defeats the purpose of statutory protection. Given that the labour inspectorate only seeks recovery of sums due, breaches of the law are, in effect, crimes without punishment which confer a net gain to employers. The NZCTU refers to the figures given in the Government's report that from June 1996 to March 1997, there were only two penal sanctions and one recovery action for minimum wages before the employment tribunal. The union expresses its concern that this is a reflection of both the inadequacy of a non-proactive inspectorate mechanism and a lack of knowledge in the workplace about minimum rights.

15. In reply to the NZCTU's comments, the Government notes that when a breach of the minimum wage has occurred, the labour inspectorate's key priority is to ensure that the breach is rectified, the law is complied with and the employees receive what they are owed as soon as possible. This is generally accomplished without the need for formal legal action in the employment tribunal or employment court. However, when such action is required, penalties are sought in all cases where the breach is considered serious enough to warrant this action.

The enforcement of the Minimum Wage Act in the agriculture sector

16. As concerns the application of minimum wage in the agriculture sector, the NZCTU notes that the scope of the Minimum Wage Act is general, and hence the Government has tended to supply the same responses to the provisions of this Convention and Convention No. 99. The NZCTU considers that, while its comments regarding inadequate inspection and enforcement machinery apply in both sectors, there are additional, special problems in agriculture, which are not adequately reflected in the Government's report on Convention No. 99. According to the NZCTU, this is a by-product of the economic reform that has taken place, resulting in a significant increase in informal sectors. The Government's own studies indicated that breaches of the minimum wage are common in agriculture (cf. Situation and outlook of NZ agriculture, 1993). Workers respond to low pay by looking for a better job, rather than seeking enforcement. The small scale in New Zealand farming means that typically there is a one-to-one working relationship between the worker and the employer, and it is almost impossible for a worker to complain and maintain a working relationship. This means that extra efforts into publicizing the level of the minimum wage along with routine inspection should be part of the enforcement mechanism. Moreover, it is only in agriculture that deductions can be made from the minimum wage as payments for board and lodgings. This makes it easier to avoid paying the nominal minimum wage, and greater efforts need to be made to assess whether board and lodgings are as valuable as is claimed when minimum wages are reduced accordingly. Finally, the NZCTU believes that there is a routine and widespread avoidance of the minimum wage in horticulture, where workers are employed on a piece-rate basis, especially on short-term seasonal contracts to pick fruit and vegetables. The piece rate is a sham designed to avoid the minimum wage, and actual earnings are often below the minimum wage. Much stronger action is needed to stamp out wholesale breaches of the law.

17. In reply to the NZCTU's comments, the Government states that it takes a proactive approach to educating and providing employees and employers in all sectors with information about employment rights and obligations. One of the reasons behind the introduction of the national toll-free telephone information service was to improve access to information for rural employees and other employers who found it difficult to contact the labour inspectorate offices. While some proactive enforcement is also carried out in order to achieve more widespread compliance with relevant employment obligations, the Government believes that ensuring widespread employee and employer knowledge of the minimum wage is the most effective way to ensure compliance. As regards payroll deductions, the Minimum Wage Act provides that certain specified and limited deductions can be made in any case where an employee is provided board or lodging by his or her employer.

18. With respect to the application of the minimum wage to workers employed on a piece-rate basis in horticulture, the Government points out, however, that the Minimum Wage Act is applicable regardless of the method of payment. The statutory minimum rate must be paid whether workers are paid by the hour worked, or by the amount that they produce. If any employee believes that he or she has been paid less than the minimum wage, a complaint can be made to the labour inspectorate.

Conclusions

19. As regards the above, the Committee recalls that Article 4, paragraph 1, of this Convention, as well as Article 4, paragraph 1, of Convention No. 99, provides that necessary measures should be taken in order to ensure that wages are not paid at less than the minimum wage rates that have been fixed, including the application of sanctions in cases of infringement of the minimum wages, with a view to guaranteeing workers the payment of such rates. Compared to the number of violations of the minimum wage legislation, the number of penal sanctions (for instance, two penal sanctions out of a total of 88 alleged breaches of minimum wage legislation between July 1996 and March 1997) appears too low and not dissuasive enough to prevent such violations and to ensure the respect of minimum wage provisions. Furthermore, with reference to its comments under the Labour Inspection Convention, 1947 (No. 81) and to the 1996 Conference Committee's conclusions on the application of Convention No. 81, the Committee considers that the number of staff of the General Labour Inspectorate (19 inspectors) is too low for the number of work-sites involved. The Committee requests the Government, in accordance with Article 5 and point V of the report form: (i) to supply the available statistical data on the numbers and categories of workers covered by the minimum wage regulations; and (ii) to continue to indicate the results of inspections carried out (including in the agriculture sector), as well as the number of violations reported and the sanctions imposed.