Employment law update April 2011

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This update provides a summary of the key changes to the Employment Relations Act 2000 and the Holidays Act 2003 (the majority of which come into force on 1 April 2011) along with initial advice in relation to the implications of these changes.

Employment Relations Act 2000

Key changes to the law include the following:

  • An extension of the 90 day trial period provision to all businesses;
  • Changes to the test for justification and fair process in personal grievance situations;
  • A requirement for employers to retain employment agreements (this comes into effect on 1 July 2011); and
  • The promotion of early problem resolution.

90 Day Trial Period

An employer and employee may agree to a trial period in the situation where the employee has not previously been employed by the employer.

An employee who is given notice of dismissal before the end of the trial period cannot raise a personal grievance on the grounds of unjustified dismissal. 

As the trial periods legislation was only introduced into the law in March 2009 it is still very much a developing area of the law. The Employment Court has considered issues that arise from trial periods in just one case to date.

Recommendations arising from the case include the following:

  • Ensure any trial period provisions are agreed to and contained within a signed employment agreement prior to the commencement of employment. If the trial period is agreed subsequent to the employee’s start date a Court may not recognise him/her as a “new employee” and therefore could declare the provision is ineffective;
  • Keep in mind your obligation to act in good faith towards all employees, regardless of whether they are on a trial period. Whilst an employer is not required to notify an employee of the employer’s proposal to end their employment or give the employee an opportunity to comment on such a proposal in a dismissal under the 90 day trial period, the good faith obligation requires an employer to give an employee reasons for their dismissal where they are requested.
  • We advise clients who are requested to give reasons for dismissal from employees to contact us to discuss before providing reasons to avoid any alternative claims being made.
  • That giving immediate notice of dismissal may not be adequate. Therefore, it is our recommendation that at least three day’s notice is provided to employees in situations where the trial period is being relied upon. Although this is not required in the legislation, as result of the Employment Court’s decision it is our view that it would be a safer option to follow.

Penalties

Penalties will increase with the maximum penalty for non-compliance by a company being $20,000 and for an individual $10,000.

Labour inspectors will also be given increased powers to penalise employers in situations where an employer has not provided an employee with an employment agreement or has failed to retain and/or provide to the employee a copy of his/her employment agreement upon request.

Justification and fair process in personal grievance cases

The law includes a “test of justification” in assessing the fairness of an employer’s actions in relation to a dismissal or other disciplinary action.

Previously the test for justification was whether the employer’s actions and process followed were what a fair and reasonable employer would have done in all the circumstances. From 1 April 2011 this will test will change to what a fair and reasonable employer could have done in all the circumstances.

The change to could is in response to a perception that the current test focuses too much on process and not enough on the reasons for dismissal or disciplinary action. This amendment means that an employer’s actions will now be measured against a range of reasonable responses rather than just one response.

In applying the test to a situation the legislation codifies principles in case law by requiring the Authority or Court to consider whether the employer:

  • Sufficiently investigated the allegations against the employee (having regard to the resources available);
  • Raised its concerns with the employee;
  • Gave the employee a reasonable opportunity to respond to those concerns; and
  • Genuinely considered the employee’s explanation in relation to the allegations.

These changes are designed to provide greater clarity to employers what is expected of them in terms of complying with the procedural aspects of disciplinary action. The changes also make it clear that an employer’s action cannot be viewed as unjustified solely because of mistakes made in the process, if those mistakes were either minor and did not result in the employee being treated unfairly.

Requirement to retain employment agreements

In addition to the requirement for all employees to have a signed, written employment agreement, the Employment Relations Act will now require employers to retain the signed copy of the employment agreement or a copy of the intended agreement where an agreement was provided to an employee but has not been signed. An employer is required to provide a copy of the agreement on request by an employee. Any breaches of these requirements could be subject to penalty imposed by the Employment Relations Authority.

Mediation

A new service will be offered by the Mediation Service allowing employers and employees to resolve problems without having representation prior to any formal mediation taking place.

Mediators will have a new power to make written recommendations to the parties at their request. Parties can then decide whether to accept the recommendation and once accepted would become binding.

Employment Relations Authority

The Employment Relations Authority will become more court-like in its operation in terms of allowing cross examination and being able to dismiss frivolous or vexation claims or defences of claims.

Authority members will also have similar powers to mediators in that they will be able to make written recommendations to the parties.

Labour Inspectors

The role of labour inspectors will be expanded from managing complaints to also supporting businesses to achieve compliance of the law through improved practices and systems.

Collective Bargaining

Key changes in the area of collective bargaining are that union representatives intending to visit a workplace will first need to gain the permission of the employer and an employer is able to communicate directly with its employees whilst bargaining for a collective employment agreement.

Holidays Act

The key changes to the Holidays Act 2003 include the following:

  • That employees will be entitled to cash up one week of their annual holidays per year;
  • The ability to transfer the observance of public holidays;
  • Requirements regarding requests for proof of sickness or injury; and
  • Changes to the calculation of payments for public holidays, alternative holidays, sick leave and bereavement leave;

Cashing up a week of annual holidays

The change in legislation means that employees will be able to ask their employer to pay out up to one week of their annual holiday entitlement per year. This can only be done at the employee’s request and must be in writing. Employees may request to cash up less than a week at a time so that more than one request may be made until a maximum of one week of holidays is paid.

Employees will not be able to cash up annual holiday entitlements that arise before 1 April 2011. For example, an employee who becomes entitled to annual holidays in January 2011 could not make a request to cash up a week’s leave until they next become entitled to annual holidays in January 2012.

A request to have holidays cashed up must be considered by the employer but does not have to be accepted.

We suggest including the option to cash up in any new employment agreements if this is something you would be open to employees doing. This way you will be able to ensure employees are aware of the option at the outset of their employment. Paying out a week’s leave to employees (where requested) could be an effective way of keeping down a company’s liability for outstanding leave.

Transferring the Observance of Public Holidays

Employers and employees can agree to transfer the observance of public holidays to another working day in order to meet the needs of the business or for the employee.

Any request must be considered in good faith and any agreement must meet the following minimum requirements:

  • Any public holiday being transferred must be identified and otherwise be a working day for the employee;
  • The day it is being transferred to must be identified or identifiable, otherwise be a working day for the employee and not another public holiday; and
  • The purpose of the transfer cannot be to avoid paying the employee time and a half for working on a public holiday or providing them with an alternative holiday.

Asking for Proof of Sickness or Injury

The legislation provides employers with the right to request proof of sickness or injury within the first three days of any employee taking sick leave if the employer informs the employee as soon as possible that the proof is required and agrees to meet the employee’s reasonable expenses in obtaining the proof. In requesting proof of sickness an employer no longer needs to have reasonable grounds to suspect that the sick leave being taken by the employee is not genuine.

Proof of sickness in situations of leave of three or more consecutive calendar days remains the same in that the employer can request an employee to produce proof of that sickness or injury at the employee’s cost.

Payment for Leave

The concept of relevant daily pay remains the same in the law, however, where pay fluctuates from day to day / week to week a new calculation of “average daily pay” can be used by employers. Average daily pay is a daily average of the employee’s gross earnings over the past 52 weeks.

If you have a payroll system, we advise you to check with your provider to ensure that any software upgrades include the calculation for average daily pay.

Taking Alternative Holidays

If an employee works on a public holiday they are entitled to be paid time and a half for the hours they work and if it is otherwise a working day for the employee they are also entitled to another paid day off. This alternative holiday recognises that the employee has missed out on having a day off work on the public holiday.

From 1 April 2011 if an employer and employee cannot agree when an alternative holiday is to be taken the employer may determine, on a reasonable basis, the day the alternative holiday will be taken on. The employer must give the employee at least 14 days’ notice of the requirement to take the alternative holiday.

 

In accordance with our obligations under the Lawyers and Conveyancers Act 2006, we cannot provide legal advice unless you have become a client of Smith and Partners and have received our Terms & Conditions of Engagement and Info for Clients. 

If you would like advice on any employment law related matters, please contact Suzanne Sumner, Personal Assistant to employment law expert, Carolyn Ranson to find out how you can become a client of Smith and Partners and to set up an appointment to discuss your employment matter with Carolyn. 

Suzanne Sumner

Ph: 09 837 6840

Email: Suzanne.sumner@smithpartners.co.nz

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