Ian Powell: Film industry bosses get their way with reformed “Hobbit Law”

Ian Powell: Film industry bosses get their way with reformed “Hobbit Law”

Have unions and the Government sold workers short with their attempt at fixing the so-called “Hobbit Law”? Unionist Ian Powell argues that the union movement has been outmanoeuvered, and the Government has agreed to a new piece of anti-worker legislation that retains the principles of the previous National Government’s hated law that it promised to repeal.


The Screen Industry Workers Bill (and what led to it) is dramatic with big lessons for unions and New Zealand unionism in particular. It includes the use of independent contractor employment status to exploit vulnerable workers, a botched attempt to honour an explicit uncomplicated commitment to repeal a piece of anti-union employment law, carving out a whole sector of industry from coverage by employment law, and poor union leadership at the highest level which included acceptance of a revised set of anti-union provisions.

Employee vs ‘independent’ contractor status

The question of whether a worker should be classified as an employee or an ‘independent’ contractor has been contentious for several years. It has been fought out by employers and unions, especially in the private sector, industrially and judicially. The importance of this fight goes to the heart of a critical part of what unionism is about – which is protecting and advocating the interests of workers in a dependent employment relationship.

Employees usually depend on an employer for work. Consequently, to help at least partially address this dependence or power imbalance, they have legal employment rights and protections. Ideally, an independent contractor doesn’t have this dependency and instead has multiple sources of work. This is the core of their independence. The electrician I use and value for occasional work at my home doesn’t depend on me for income. He has many other households and businesses to keep him busy and financially secure.

But it not always as simple as this. What about, for example, someone who is called an independent contractor but is dependent on the one body for employment? This has been the source of contention for so long and was at the heart of the infamous Hobbit dispute in 2010 leading to what became known as the “Hobbit law” that the Labour Party committed to repealing both before and after the 2017 election.

The key test

After many years of battles, some litigious, the key test has become what is the ‘real nature’ of the employment relationship. The Employment Relations Act 2000 (ERA) contains an important progressive provision [s6(2)]:

In deciding for the purposes of subsection (1)(a) whether a person is employed by another person under a contract of service, the Court or the Authority (as the case may be) must determine the real nature of the relationship between them. (emphasis added)

Even when workers are described in an employment agreement as an independent contractor, if the real purpose of their work means that in effect they are employees then that is what they are. In other words, if they look like and quack like ducks then they are ducks even if they are called chipmunks.

This test has been helpful in enabling, for example, workers engaged by a labour hire company as independent contractors to successfully argue to the Employment Court that they were actually employed as employees by the owner.

In film production the term independent contractors for many workers is a misnomer because they are in a dependent employment relationship. But they are denied the legal protections that employee status provides.

The ‘Hobbit law’

The so-called ‘Hobbit law’ was introduced as a result of effective pressure by wealthy filmmaker Peter Jackson (unhappy over losing a case in the Employment Court over the issue of employee status) and others in the film industry along with Warner Brothers. Together, and with the support of the Key government, they were able to defeat the relevant union’s (now called Equity New Zealand) attempt to negotiate terms and conditions for its members who would be working on the Hobbit films.

The Council of Trade Unions (CTU) didn’t need to be as actively supportive as it was of the union. But its courageous and principled President Helen Kelly recognised that the dispute was more than supporting an affiliated union; it was about one of the core principles of unionism – the rights of vulnerable workers. The dispute escalated into a vicious war including the then National-led government and film industry reneging on an agreed compromise settlement, attempts to intimidate Kelly and local union activists, and even death threats.

The outcome was a victory for the film industry and Warner Brothers. The new “Hobbit law” involved amending the Employment Relations Act [s6(1)(d)] to exclude film production workers from the definition of employee, unless there is a written employment agreement that states the worker is an employee.

The effect of this amendment is that film companies can contract out of employment law.  If the agreement with the worker does not state the worker is an employee, the worker is not an employee even if the real nature of the relationship is of an employee.  The “real nature” of the employment relationship’ is abandoned. In other words, the quacking duck has to be regarded as a chattering chipmunk.

Screen Industry Workers Bill

It is this issue that the Screen Industry Workers Bill was intended to address. Then Workplace Relations Minister Iain Lees-Galloway set up the Film Industry Working Group. Although formed to address the employments relations controversy of the Hobbit law, only two of the 13 members were union representatives (one from Equity NZ and CTU President Richard Wagstaff). Secretarial support was provided by the influential Ministry of Business, Innovation and Employment. The Bill is based on the report of the manipulatable working group.

The obvious step would have been to treat film workers the same as everybody else by simply removing the “Hobbit amendment”. Very uncomplicated one would have thought. Instead, a potentially effective alternative scheme was advanced by Government.

This alternative initially had two parts.  First, additional bargaining rights would be conferred on film workers allowing them to organise collectively regardless of whether they were employees.  Second, certain other rights would be conferred on them as a kind of replacement for worker rights. Unfortunately, these were not achieved in the Bill currently before Parliament.

The Bill starts by affirming that if an agreement states that a worker is not an employee, he or she is not an employee. By allowing film industry employers to contract out on employment law this reaffirms the current ‘Hobbit law’. To avoid any doubt the Bill specifically provides that the ‘what the employment relationship looks like’ test cannot be invoked [s6(2) of the ERA]. In other words, the Bill reaffirms the carving out of the film industry from employment law.

The initial idea from the Government advanced alternative was that the good faith obligations in the ERA would apply.  However, this is not provided in the Bill.  Instead, it imposes a much more limited good faith obligation (that is, only an obligation not to mislead or deceive; much less than what the Act provides).

The Bill does provide for certain mandatory terms for contracts, but these are scant at best. There are only three. The first requires that both parties must comply with the Health and Safety at Work Act 2015 and the Human Rights Act 1993, which they are required to do anyway. The second requires a plain language explanation of the process by which the screen production worker may raise (and the company reply) a complaint by the worker about bullying, discrimination, or harassment in the workplace. Finally, compensation may be payable to a worker if the company terminates the contract.

Unjustified dismissal rights are severely limited and much less than what an employee would be entitled to. In contrast to employees, access to the ERA dispute resolution procedures is voluntary.

Collective bargaining

The Bill does provide for a collective bargaining scheme, which to a limited extent mirrors the ERA.  However, strike action is expressly prohibited (and is punishable by heavy fines). This prohibition includes partial actions such as refusing to undertake one or more of their normal duties. It is extraordinary that the two union representatives (one of whom was the CTU President) on the working group agreed with the ban on the right to strike. Further, there is no compensating right to compulsory arbitration.

Under the ERA it is permissible for employees to be covered by both individual and collective employment agreements. But the individual agreement can’t include any term that is less favourable to a term in the collective agreement. For the reason of employee protection, there is a necessary status of agreement hierarchy.

The Bill reverses this hierarchy for film workers. It uses the terminology of ‘contract’ instead of the ERA’s terminology of ‘agreement’. But the Bill makes it mandatory where a collective contract is agreed for the company and worker to then enter into an individual contract that must allow for one or more terms relevant to screen production to be less favourable to the worker than those in the collective contract.

The rights to collective bargaining under the Bill are considerably less than for employees under the ERA. Unlike employees covered by the ERA, initiation of bargaining for occupation-level collective bargaining can only proceed if the Employment Relations Authority is satisfied that there are more individuals who do the work in the occupation who want to bargain than do not. If this restriction applied to high turnover industries or casualised sectors such as fast food and supermarkets, achieving a collective agreement would be much more difficult than it presently is.

However an employer need not participate in this type of bargaining.  Any employer who receives an initiation notice may simply notify the union that it does not consent to it and then need take no further step.

Entrenching anti-union provisions

Rather than repealing the “Hobbit law” that was so strongly condemned by the CTU and Labour Party (both of whom were committed to repeal), some strong anti-union provisions have become entrenched.

These provisions include cementing in the existing right of film industry employers to contract out of employment law and all the protections and rights that this provides. Further, they prohibit strikes. Even for workforces where strike action is difficult, the existence of the right to strike regardless of whether it is exercised can be important for advancing workers’ interests. The police are denied the right to strike. But they are entitled to compulsory arbitration. No such luck for film workers.

To rub more salt in the wounds the Bill allows film companies to decline to bargain collectively. This is further compounded by the exclusion of the full good faith provisions of the ERA. The trade-off for film workers is the conferring of some very limited rights akin to a few crumbs from a hobbit second breakfast.

How on earth (aka WTF)?

How on earth did this happen? The task (repeal a short anti-union provision) was uncomplicated. It was a strong explicit Labour Party commitment, as it was for the CTU. The film industry is influential and has done well out of obtaining taxpayer investment in film production. But this is influence, not power. The Jackson-led film industry succeeded in 2010 because it had a government supportive of its employment relations position.  This was not the case after the 2017 election. In 2010 Jackson could use his charisma to generate a perceived threat to the Hobbit filming in order to garner a reasonable level of public support. This circumstance doesn’t apply now. Completing the picture is MBIE with its role as an influencer to the working group.

What appears to have happened is that Minister Lees-Galloway with limited experience in employment relations was encouraged by his advisers to go down the path of an alternative approach. If that original alternative approach had been the outcome then many if not all of the serious failings of the Bill would not exist. He also opted to establish a large working group with limited union involvement which became the means by which repeal was abandoned and the alternative approach severely compromised.

An astute CTU leadership should have been capable of ensuring that if there was not to be a simple repeal of the 2010 amendment to the ERA, then there should not be any of the anti-union provisions that presently exist in the Bill. If there was to be a working group it should have been joint employer-union.

Alas, this was not the case. The MBIE ‘influencers’ were successful in effectively shifting the goalposts to the extent that the CTU President ended up endorsing anti-union legislative provisions that in any other circumstance the CTU would have vehemently opposed such as carving out an industry from employment law coverage and banning the right to strike. To be harshly blunt about it, MBIE was much nimbler.

Equity NZ representing film workers is a courageous union that punches above its weight. It supports the Bill because it is better than what it would replace.  This is true and understandable, especially given the employment vulnerability of its members. But it is only a little better and the principles of the 2010 ‘Hobbit law’ remain largely intact and in some respects more entrenched. One lot of anti-unionism is replaced by another.

The issues that sit behind the Hobbit dispute are not just applicable to one union; they are also applicable to wider unionism. Should the Bill become law it may not set a legal precedent for disputes over employee versus ‘independent’ contractor status. But even if it doesn’t, it certainly sets a political precedent that the National Affiliate Council of the CTU should turn its mind to. Never again should representatives of the union movement be so outmanoeuvred.


Ian Powell was formerly the Executive Director of the Association of Salaried Medical Specialists for over 30 years until December last year.  He is now a health commentator, editor of the blog ‘Otaihanga Second Opinion’, and based in Otaihanga on the Kapiti Coast.

This article can be republished under a Creative Commons CC BY-ND 4.0  license. Attributions should include a link to the Democracy Project.