New Zealand: Problems Of ‘Preference’ When Only Some Staff Are Union Members

Last Updated: 3 June 2009
Article by John Hannan

Collective bargaining has advantages for employers. There is no need to negotiate individual pay, terms and conditions with individual staff members. It achieves certainty about pay, terms and conditions for the life of the collective employment agreement (CEA). But it has difficulties when the workplace is only partly unionised. Can the employer offer non-union staff the same deal, or a better deal, than it is offering union members in collective bargaining? These problems are illustrated by a recent Employment Court case, NZ Meat Workers and Related Trades Union v Taylor Preston Limited WC8/09 [2009] NZEmpC 34.


Taylor Preston operated a meat works employing about 600 staff. Only a minority were members of the union. Their CEA expired in mid-2005.

The union initiated bargaining for a new CEA. After some time, the company made a final offer at the end of 2005 of a 10% wage increase spread over three years. The union members rejected this.

Taylor Preston then offered its non-union staff an individual employment agreement (IEA) with the same offer as that made to the union. By early 2006, almost all the non-union staff had accepted.

Two months later, the employer formally ended the collective bargaining by withdrawing from it. It said that since collective bargaining had ended, the union members would remain indefinitely on their existing terms and conditions.

The employer also decided to offer the IEA only to any employees who resigned from the union. It said if it made the new IEA available to union members this could be breaching its employment law obligations. A number of union members did resign, and accepted the increases and the new IEA.

The employer was afraid that the union had a strategy of having its members accept the IEA without concluding a CEA, and then initiating bargaining for a new CEA, later. That, it said, was why it required staff to resign from the union before they could accept a new IEA.

When Does An Unlaw Ful Preference Exist?

Section 9 of the Employment Relations Act 2000 (the Act) prohibits any agreement or arrangement which gives a person any preference in employment conditions because they are or are not a member of a union. There have been a number of cases on this section. It is clear that non-union staff can have different pay, terms or conditions to union staff. That is not an unlawful preference. The courts focus on the reason, or purpose, for which the preference was given. This is said to be a matter of fact. Is there an 'objectively identifiable reason for the preference other than membership of the union'? In one case, the employer preferred to deal with one union over another, and so made preferential payments to members of one union. This was an unlawful preference. In another, the union had negotiated a 'partnership for quality' agreement and as a result union members were offered improved conditions. This was a lawful preference.

The problematic aspect of the Taylor Preston situation is that the Court says that the difference between the non-union and union conditions was not a 'preference' while collective bargaining was still continuing. The company could not negotiate individual employment terms with union members during bargaining because that would breach other provisions of the Act. But once the bargaining had ended, the company was free to negotiate IEAs with the union members. Yet at that time the non-union staff had better payments than their fellow employees doing the same work. So the strange situation was reached that what is not a preference before the collective bargaining ends, becomes a preference when it does.

The Decision

The Court concluded it was not only a preference, but an unlawful preference. The only reason why the union members were not offered the improved IEA terms was because of their union membership. So the reason for the preference was union membership.

Strangely, the Court considered that the company's stated motive did not make a difference. The company had said it did not want to have its union member employees leave the union, accept the pay increases, then rejoin the union and initiate bargaining. The Court considered that while this might have been the company's motive it wasn't sufficient to make the preference lawful; the preference was given to non-union staff because they didn't belong to the union. The non-union staff weren't giving any extra benefit to the employer which would justify such a preference.


Offering wage increases or other 'deals' to non-union staff where only part of the workforce is unionised, and collective bargaining is underway, has several pitfalls. Breaching the preference section is one. Another danger is the possibility that if the employer offers the same 'deal' to non-union staff as it is offering to the union, it will be accused of 'undermining' the collective bargaining, under section 59B of the Act. And if the employer makes the same offer of individual employment terms directly available to union members, it will be accused of improper communications with persons represented by the union.

The effect of this judgment seems to be that if during collective bargaining an employer offers improved individual employment terms to non-union staff, the employer will be forced to offer the same improved conditions to union staff when the collective bargaining ends. There is, however, nothing to stop such union staff from accepting such an individual employment agreement, and then, next day, initiating bargaining for a collective agreement. A strange outcome.

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This publication is intended as a first point of reference and should not be relied on as a substitute for professional advice. Specialist legal advice should always be sought in relation to any particular circumstances and no liability will be accepted for any losses incurred by those relying solely on this publication.

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