Employment Law

25 Jul 2010

The Government has announced a number of proposed changes to the Employment Relations Act (ERA) and Holidays Act. Although the changes may positively impact on employers in a number of ways, for the most part they are not as drastic as some commentators are claiming. In the main, they are consistent with National's pre-election promises.

The changes aim to provide some clarity and guidance for employers (particularly in the area of dismissals), while enhancing the processes of attending mediation and investigation meetings before the Employment Relations Authority. The key changes are outlined below.

EMPLOYMENT RELATIONS ACT

90-day Trial Period

The 90-day trial period for new employees will be extended to cover all employers, not only those with fewer than 20 employees. This means that, for all new employees, an individual employment agreement may remove the ability to raise a personal grievance in respect of a dismissal within the first 90 days of employment.

Employees will be able to bring a claim for sexual or racial harassment, discrimination, an unjustified action causing disadvantage in employment, duress and a failure to comply in business transfer provisions.

Test of Justification for Dismissals

In response to concerns that the current law puts too much emphasis on the employer's process and not enough focus on the employer's action, s103A of the ERA will be amended by replacing the word 'would' with the word 'could'.

As a result the question of whether a dismissal or an action was justified will be determined on an objective basis by considering whether the employer's actions, and how the employer acted, were what a fair and reasonable employer could have done in all the circumstances at the time the dismissal or action occurred.

This returns the test of justification to that which existed for many years before 2000. It reflects the principle that it is not for the Authority or Court to substitute its judgment for that of the employer, and that there may be a range of reasonable disciplinary sanctions in any situation.

Minimum Requirements of a Fair and Reasonable Process

There is a proposal to amend the ERA to include minimum requirements that employers must follow in any disciplinary process. As the Government has confirmed that an employer's disciplinary process should not be subject to "pedantic scrutiny", we do not consider minimum process requirements are required.

In particular, one of the elements proposed is whether, as a result of any "deficiencies" in the process undertaken by an employer, there was a "probability" that the employee was unjustly treated. This concept is vague and has the potential to defeat the purpose of simplifying the law in this key area.

Code of Employment Practice

There is a recommendation that a Code will be prepared to cover disciplinary and dismissal procedures. Again, we believe this is unnecessary and will create a level of unnecessary complexity.

Reinstatement

Although reinstatement will be retained as a remedy, it will no longer be the "primary" remedy. This change is intended to recognise the reality that reinstatement is often not practicable or reasonable.

Written Employment Agreements

An employer will be required to provide employees with a copy of a signed employment agreement or, where it has not been signed, an unsigned copy of that agreement.

Vexatious or Frivolous Claims

The Authority will have the ability to strike out vexatious or frivolous claims early on in the process.

Expiry of Personal Grievances

Personal grievance claims filed within the last three years, but not actively progressed or pursued, will be treated as withdrawn.

Mediation

The Authority will promote mediation by giving priority to mediated cases. The government also proposes that before the parties go into formal mediation, they may obtain an assessment of the risk of proceeding with, or defending, a grievance. Our concern is that the success of this step will depend on the quality of the advice.

Recommendations

Mediators and members of the Authority will be able to make recommendations to parties, at their request. Although mediators already have the power to make a binding decision (provided both parties agree), this provision has been used infrequently, partly because there is no appeal against the mediator's decision. This proposal would allow a recommendation to be made, then the parties would have seven days to decide whether to accept it, at which point it would become binding.

Increase in Penalties

Maximum penalties will be increased from $5,000 to $10,000 for individuals, and from $10,000 to $20,000 for companies.

Delaying Tactics

Parties that engage in behaviour that delays the Authority (such as filing late claims without good reason or other delaying tactics) could have penalties awarded against them.

Union Access

Rules on union access to workplaces will change, so that any access will require the consent of the employer. That consent cannot be unreasonably withheld. This change recognises the employer's right to confirm who comes into the workplace at any time. This largely standardises current practice, as most union visits to workplaces are made with notice.

Communications

An employer will be able to communicate directly with employees during collective bargaining (including details of any settlement offer), provided such communications are consistent with the duty of good faith.

This proposal largely reflects the current law (as confirmed by the Court of Appeal in Christchurch CC v Southern Local Government Officers Union Inc). However, the proposal provides clarity for employers that they can publish details of an offer made, without a claim that this undermines the bargaining or the union's role.

Mechanical Changes to Authority Processes

Various changes are proposed to the Authority's process, such as confirming the right to cross-examine witnesses, removal of cases to the Court and discovery.

HOLIDAYS ACT

Following the 2009 review of the Holidays Act, a lengthy report was submitted to Government in December 2009. Although there are no changes to employees' core leave entitlements, the Government has now announced proposed changes.

Cashing Up Leave

Employees will be able to trade one of their four weeks' annual leave for cash. This is only at the employee's request and cannot be raised in salary negotiations. Employers may not require, request or otherwise seek agreement from employees to cash up leave. Employers may however refuse a request from an employee to do so.

Average Daily Pay

A new formula of "Average Daily Pay" will be used to calculate leave entitlements. This will be simpler for employees who have variable hours and pay, and is based on the average of an employee's pay over the past year.

Transferring Public Holidays

Employers and employees will be able to agree to transfer the observance of public holidays to another working day. This change largely reverses the Supreme Court's judgment in NZALPA IUOW Inc v Air NZ Ltd, which held that the Holidays Act does not entitle an employer and employee to redefine the public holidays and transfer a public holiday to another day.

The change would allow public holidays to be transferred to recognise, for example, different religious holidays for individuals.

Penalties

Consistent with the changes to the ERA, maximum penalties will double for employers who don't comply with various provisions within the Holidays Act.

Proof of Sickness or Injury

Employers will no longer have to wait for three days before asking for proof of sickness from employees. However, employers will have to cover the employee's costs in obtaining such medical reports.

TIMEFRAMES

A Bill is currently being drafted for introduction this year, and the government has stated that the changes are likely to be implemented in July 2011.

There will be a select committee process with the opportunity for public submissions. Simpson Grierson will be making submissions.  We would be happy to provide further information regarding the proposed changes, or to assist your organisation to make submissions on the Bill.