See here and here.
Russell Brown notes one of the odder demands of the union rep:
On the some day Actors' Equity organiser Frances Walsh spoke to the Herald:It would have been very surprising indeed had nudity shown up in The Hobbit. They were able to avoid it entirely in the main Lord of the Rings films; the graphic love scenes between Frodo and Sam detailed in the as yet unreleased (and probably apocryphal...ok, I just made it up) unedited versions of Tolkien's story being left instead for the viewer to infer from Hayes-code era metaphors.Many of the issues the union were seeking to negotiate related to basic conditions such as accommodation, smoking, nudity, credits and not just pay
"We can only say, hey, what we'd like on this production is a fair suck of the sav. We would like to negotiate with you fair terms and conditions for the engagement of New Zealand performers on the Hobbit."
Brown helpfully clears things up:
It seems highly unlikely that there will be nudity in The Hobbit. In fact, there won't. What Equity is trying to do is to negotiate an industry-wide agreement via Peter Jackson. As things stand, the actor contracts being drawn up for The Hobbit will be the best New Zealand screen actors have ever received for work in New Zealand; they even include the first provision for residual payments. They blow anything a local producer could offer out of the water.Fortunately it's now sounding like things will wind up being settled. But what an idiotic look for a country with a rather young film industry whose main advantages are decent scenery (albeit not exactly non-replicable), lowish wages, and having Peter Jackson nearby.
It would be unethical and crazy for Jackson to participate in talks on such a basis.