Employment law changes on horizon

Article written by John Farrow and published in the Otago Daily Times on 25 August 2023. 

When Labour came to power in 2017 it brought with it a raft of employment law changes.

Throughout its two terms it continued to implement changes including, perhaps most controversially, the enactment of the Fair Pay Agreements Act.

While the new government is yet to be formed, the likely coalition of National and Act New Zealand signalled during their campaig various changes to employment law.

Whether these come to fruition is yet to be seen. However it is entirely likely that the Fair Pay Agreements Act will be repealed and 90-day trial periods will be reintroduced for all businesses.

Ninety-day trial period

Ninety-day trial periods were first introduced by the John Key-led government as a response to the global financial crisis. The rationale was that it would encourage employers to take on new employees without risk for at least the first 90 days of employment.

Labour limited its application to employers with fewer than 20 employees.

National and Act indicated they would reintroduce the ability for all businesses, regardless of how many employees they have, to utilise the 90-day trial period. National listed this in its 100-day action plan.

Business New Zealand chief executive Kirk Hope stated it would be useful for businesses to have 90-day trials fully operational again for use in tight employment conditions.

While the current economic climate, including high inflation, is having an effect, unemployment numbers are still very low.

However, should that situation change, 90-day trials do allow employers a window into an employee’s performance and cultural fit.

They are generally opposed by unions, which have termed them ‘‘ fire at will’ ’ clauses because there is no right of personal grievance for a dismissal during the trial period.

Fair Pay Agreements Act

National and Act indicated they would repeal the Fair Pay Agreements Act. This has only recently come into effect and was championed by Michael Wood.

It is a huge piece of legislation, spanning 283 sections. Opponents such as Business New Zealand argue that nowhere else in the world are employers compelled to engage in collective bargaining.

In addition, the various steps required were anticipated to result in protracted negotiations and litigation.

Extra resources were required — Labour signalled specialist additional Employment Relations Authority members and additional mediation resources were needed.

There are five industries bargaining. However no agreements have yet been concluded.

New Zealand Council of Trade Unions chief economist Craig Renney argued the process of bargaining should be continued.

The Act requires both parties to engage in good faith, and a failure to do so in anticipation of a change in legislation could give rise to penalties.

If National and Act are to form a coalition and repeal the legislation as quickly as has been signalled, it is likely that this will occur before any agreements are finalised.

Employment Relations Authority

Act also indicated it intended to target the Employment Relations Authority by:

• requiring its members to release a determination within one month of an investigation hearing (as opposed to the current three-month timeframe);

• firing any members who do not meet that deadline;

• preventing the authority from unilaterally reinstating a dismissed employee, instead leaving it to the employer to decide whether the employee will be reinstated;

• removing the eligibility for remedies if the employee’s behaviour contributed to the personal grievance.

The current three-month timeframe for releasing determination is, more often than not, observed in the breach with authority members constantly requesting extensions.

With current authority resources, releasing a determination within one month is unrealistic.

On the up side, however, if the Fair Pay Agreements Act is repealed then the additional resources signalled by Labour will no longer be required. However, there are significant delays in allocating mediations and authority investigations.

Reinstatement was returned by Labour to the primary remedy for dismissal.

Historically the legislation has seesawed between reinstatement being and then not being the primary remedy. Until recently, the stats had shown little tangible difference.

However, under the current chief judge of the Employment Court there has been a sea of change with various notable interim reinstatement applications being successful.

The prospect of reinstatement provides the employee with a significant amount of leverage and also better requires the employer to comply with the fair and reasonable standard.

Leaving the employer to decide whether the employee will be reinstated is tantamount to removing the remedy altogether.

However, whether Act’s proposed changes to the Employment Relations Authority are supported by National remains to be seen.

Sick leave

In 2021 the Labour-led government increased employees’ minimum sick-leave entitlement from five to 10 days per year.

National indicated there were no plans to change this, whereas Act said it would reverse this.

Independent contractors

In some recent decisions by the chief judge of the Employment Court, contractors have been found to be employees. This has included Uber drivers, courier drivers and building labourers.

Act said it intended to address the legal issues surrounding employee/ contractor debate.

As a result, Act stated it would amend the Employment Relations Act so that contractors who had explicitly signed up for a contracting agreement could not challenge their employment status.

Act would require the contract between the parties to meet certain minimum standards that protect workers’ freedom to contract. Again, it is not clear whether this proposed change is supported by National.

Once the government is formed, both employers and employees alike will watch with interest to see whether the coalition will implement National’s campaign promises within the first 100 days and whether Act will have sufficient influence to implement the changes it has promised.

You can read the full ODT article here.