The Employment Relations Act 2000 (the Employment Relations Act) establishes the framework for employment relationships in New Zealand, as well as establishing the country's statutory bodies that rule on employment disputes, and their jurisdiction.
There are three specialist institutions that deal with employment dispute resolution in New Zealand: the Mediation Service; the Employment Relations Authority; and the Employment Court. The Employment Relations Act promotes mediation as the primary problem-solving mechanism to reduce the need for judicial intervention. Accordingly, in most instances, an employment relationship problem is first directed to the Mediation Service, which is part of the Ministry of Business, Innovation and Employment.
Where a matter is not resolved through mediation, it may be heard by the Employment Relations Authority, which has extensive jurisdiction pursuant to the Employment Relations Act. The Employment Relations Authority is an investigative forum that resolves employment relationship problems through an inquisitorial process of establishing facts and making a determination according to the substantial merits of the case, without regard to technicalities. Its aim is to promote good-faith behaviour, and act in equity and good conscience, consistent with the Employment Relations Act and the relevant employment agreement.
A party is able to appeal any determination of the Employment Relations Authority to the Employment Court and can elect to have their appeal heard de novo. Most challenges to the Employment Court are de novo.
The Employment Court is a court of record and follows the traditional adversarial model as opposed to the inquisitorial model adopted by the Employment Relations Authority. Decisions of the Employment Court may be appealed to the Court of Appeal, but only on an important point of law,2 and the Employment Court's interpretation of the construction of an individual or collective agreement may not be challenged. Any decision of the Court of Appeal on an employment law issue may be appealed to the Supreme Court provided it is an important point of law.
A key aspect of the Employment Relations Act (as opposed to its predecessor, the Employment Contracts Act 1991) is that it imposes a statutory duty of good faith on each party to an employment relationship.3 This duty, unique to New Zealand, is wider in scope than the implied mutual obligations of trust and confidence, and requires parties to be active, constructive, responsive and communicative in establishing and maintaining a productive employment relationship.4 Parties to an employment relationship include (among others) employer and employee, employer and trade union, and trade union and union members.5
Other key pieces of employment legislation in New Zealand include: the Holidays Act 2003 (the Holidays Act), which governs the law in relation to statutory holidays and leave, and methods for calculating such leave; the Minimum Wage Act 1983 (the Minimum Wage Act), which governs the minimum wage paid to employees; the Parental Leave and Employment Protection Act 1987, which governs statutory rights for employed parents; the Equal Pay Act 1972; the Human Rights Act 1993; the Privacy Act 1993 (the Privacy Act); the Protected Disclosures Act 2000 (New Zealand's whistle-blower legislation); and the Health and Safety at Work Act 2015. In addition, there is legislation covering the government superannuation framework (KiwiSaver) and workers' compensation framework (Accident Compensation).
II YEAR IN REVIEW
The year 2018 saw a lot of change in the employment landscape. This included a number of amendments to the Employment Relations Act, as well as proposed legislation concerning equal pay, triangular employment relationships (involving an employer that contracts an employee to another third party that has some direction or control over the employee in its own right) and protection for victims of domestic violence. In addition, the government established the following working groups:
- Pay Equity: to develop new legislation to tackle pay equity;
- Film Industry: to consider the status of film industry workers;
- Fair Pay: to consider a proposal to return to sector-level bargaining;
- Holidays Act: to consider a new or significantly amended Holidays Act that is future-proofed and easier to use; and
- Future of Work: to consider what the future may look like for the country's industry.
The Employment Relations Amendment Bill received royal assent on 11 December 2018. Certain provisions came into effect on that date, with others coming into effect on 6 May 2019. The amendments implement the government's post-election commitments to restore certain minimum standards and protection of employees, as well as a suite of other changes aimed at promoting and strengthening collective bargaining and union rights in the workplace.
The Domestic Violence – Victims' Protection Act 2018 was passed into law. This Act provides 10 days' additional leave and permits short-term flexible working arrangements for victims of domestic violence.
III SIGNIFICANT CASES
In Prasad v. LSG Sky Chefs,6 the Employment Court considered a triangular labour hire arrangement. Workers were engaged as contractors by Solutions Personnel Ltd, which then deployed them to perform work for LSG Sky Chefs, with whom it had a commercial relationship. In this case, there were no written employment agreements between the workers and LSG Sky Chefs. However, the Court considered the true nature of the relationship and found that the workers were in fact in an employment relationship with LSG Sky Chefs, the 'host' organisation. Specifically, the Court held that the workers:
- had no control over the way they did their work;
- had no control over where they did their work;
- had no economic interest in the way in which the work was organised;
- were subject to the strict direction and control of LSG supervisors at all times they did not work as individuals they had no say in the terms on which they performed the work;
- had no input into the documentation that purported to reflect what sort of relationship they had with LSG, through Solutions;
- could do little to make their putative business more profitable;
- were required to wear LSG uniforms;
- were provided with training by LSG;
- were fully integrated into the LSG business; and
- had no other real source of work.
In FGH v. RST,7 the Employment Court considered the relationship between managing poor performance and mental health. In its decision, the Court was critical of RST for not seeking further information on the medical condition of an employee it was managing, despite knowing that the employee was suffering from attention deficit disorder and an anxiety disorder, which affected her performance. Ms H had raised a disadvantage grievance asserting that RST had failed to provide a safe work environment when dealing with her performance issues and subjected her to unwarranted stress. The Court rejected Ms H's claims that she was being bullied. However, the Court was highly critical that, despite knowing Ms H's medical issues and concerns regarding health and safety, RST never sought further information on her medical condition. The Court held that to commence and maintain the performance management process and two disciplinary processes, in the absence of steps to obtain medical advice, was not what a fair and reasonable employer could have done in all the circumstances. Ms H was therefore successful in establishing that she had been unjustifiably disadvantaged by RST's actions.
While the Court sought further submissions from the parties regarding remedies, as only limited evidence was presented on this point at the substantive hearing, it is a useful case to be aware of when managing an employee with an underlying mental health condition. The Court's decision makes it clear that an employer should not simply proceed with a typical disciplinary or performance management process if an employee's underlying medical condition may be contributing to their performance or behavioural issues. Rather, the employer should consider seeking further medical information from the employee to ensure that they manage the process appropriately.
In Lyttelton Port Company Limited v. Arthurs,8 the Employment Court set out the following key principles to be considered in a medical incapacity enquiry:
- The employer must give the employee reasonable time (in the circumstances) to recover from the injury or illness.
- The employer is required to carry out a fair enquiry and then to make its decision about whether to dismiss the employee, balancing fairness to the employee and the reasonable dictates of its practical business requirements.
- Fair and reasonable procedure will include notification of the possibility of dismissal and a fair enquiry enabling an informed decision, including seeking input from the employee.
- The terms of the employment agreement and any relevant policy, the nature of the position held by the employee and the length of time the employee has been employed with the employer are factors that are likely to inform an assessment of what is reasonable in the particular circumstances.
- Where the actions of the employer caused an employee's condition, the employer may have an ongoing responsibility to take reasonable steps to rehabilitate the employee.
- Even in a large organisation, an employer is not obliged to keep a job open indefinitely.
- The relationship is a 'two-way street'. A lack of positive engagement from an absent employee may count against any later complaint.
This enquiry needs to balance fairness to the employee and the reasonable commands of the organisation's practical business requirements. The Court held that, even in large organisations, there comes a time that an employer can fairly 'cry halt'. In this case, the employer was justified in terminating the employee's contract on medical grounds given the circumstances. The medical information provided an uncertain prognosis about the employee's return to work, and the employee was criticised for his lack of positive and constructive engagement in the process.
In Richora Group Limited v. Cheng,9 the Employment Court attributed dollar figures to the financial bands that had been created for evaluating compensation for humiliation, loss of dignity and injury to feelings under Section 123(1)(c)(i) of the Employment Relations Act. The Employment Court determined that the bands are as follows: band one, low-level harm, up to NZ$10,000; band two, medium-level harm, NZ$10,000 to NZ$40,000; and band three, high-level harm, NZ$40,000 and over. In this case, the harm was considered to fall within band three.
Ms Cheng was an employee of Richora Group Limited, which specialises in exporting manuka honey. Ms Cheng became an employee of the company in approximately January 2017 (although the exact date was disputed) but she stopped working in March after Mr and Mrs Li, the owners of the company, accused her of complaining to the Inland Revenue Department (IRD) about their failure to pay her wages. Ms Cheng had not signed an employment agreement and, after learning of the IRD complaint, Mr and Mrs Li attempted to get Ms Cheng to sign an employment agreement and agree to accept NZ$3,000 in exchange for her resignation. The following day, Ms Cheng had an acute stress reaction and attempted to commit suicide. A couple of weeks later, Mr Li posted negative comments about her on an online forum popular with the Rotorua Chinese business community. Although she was not identified by name, the Chinese community in Rotorua is small, and Ms Cheng was easily identifiable as the person whom Mr Li was complaining about.
The Court accepted Ms Cheng's evidence as to the start date of the role and that she had worked the hours that she claimed. The Court found that, despite being aware of Ms Cheng's mental health issues, Mr and Mrs Li aggressively pursued her resignation such that it was no surprise that she felt she had effectively been dismissed. Ms Cheng was awarded lost wages plus back payment for her unpaid wages. With respect to compensation for Ms Cheng's hurt and humiliation, the Chief Judge considered the 'dramatic' effect that the actions of the employer had on her mental health. Her Honour referred to the bands identified in Archibald v. Waikato DHB and considered that the harm suffered fell into the highest band (band three). The Chief Judge traversed other cases where significant effects on the employee's mental health followed an unjustified dismissal. Despite considering that the case fitted into band three, the Court only awarded Ms Cheng NZ$20,000 in compensation for hurt and humiliation as that was all that was sought by her.
IV BASICS OF ENTERING AN EMPLOYMENT RELATIONSHIP
i Employment relationship
The concept of good faith underpins employment relationships in New Zealand.
Under the Employment Relations Act, employers are required to provide individual employees with written employment agreements and to retain a signed copy of the employment agreement. It is best practice for employers to require employees to sign an employment agreement before they commence work. However, prospective employees should be given a reasonable period of time to obtain independent advice before signing an employment agreement.
The absence of a written employment agreement does not necessarily mean that no employment relationship exists. An employee may refuse to sign the employment agreement offered to them. In this case, the employer must retain a copy of the agreement offered to the employee along with evidence setting out the processes it has followed when offering the employee the employment agreement and why the employee will not sign.10 If an employee does not have an employment agreement, or an employer does not retain one on file, the employer may be subject to fines imposed by the courts.
There are two broad types of employment agreements in New Zealand: individual employment agreements and collective employment agreements.
Individual employment agreements are between an individual employee and an employer. These agreements can be permanent, full-time, part-time, fixed-term or casual. They must contain the names of the employer and employee, a description of the work to be performed, hours of work, salary or wages, the place of work, an employment relationship problem-resolution clause, a clause setting out the process the employer will follow in restructuring situations and a description of the expectations surrounding public holidays.11
Collective agreements are between at least one employer and at least one registered union, and must cover at least two employees who are members of the union. They can cover permanent, full-time, part-time, fixed-term and casual employees, and may cover all or some of the employees in a workplace. They must also include a coverage clause specifying exactly what type of employees and jobs are covered. In addition, they must name all the unions and employers that are parties to the agreement, contain a variation clause, an employment relationship problem-resolution clause, a clause setting out the process the employer will follow in restructuring situations, and set out when the agreement will expire (a maximum of three years).12
Good-faith bargaining applies to bargaining for both individual employment agreements and collective agreements. The parties must consider and respond to each other's proposals, and be responsive and communicative. The collective bargaining regime is more prescriptive than the regime for bargaining for an individual employment agreement as it takes place between a union and an employer, and requires the following: agreement as to the collective bargaining process; the formal exchange of claims in bargaining, and the negotiation and agreement on those claims; and a formal ratification process with union members who are covered by the collective agreement.
Fixed-term employment agreements are lawful provided there is a genuine reason, based on reasonable grounds, for the agreement to be of a fixed term – for example, at the close of a specific date or period, the occurrence of a specific event or the conclusion of a specific project. Common examples are where a fixed-term arrangement is used to cover an individual who takes parental leave or who is required for a specific, technical project. In addition, the employment agreement must state the reasons for the fixed term and when it will come to an end.13 Fixed-term agreements cannot be used to assess an employee's suitability for permanent employment.
Individual employment agreements can be varied by agreement between the employer and employee. Often, variations must be recorded in writing or as required in the employment agreement. A variation clause is required in any collective agreement, and the agreement can be varied in accordance with this clause. This is usually by a vote of union members who are impacted by the change.
ii Probationary periods
The Employment Relations Act provides for statutory trial periods, which from 6 May 2019 will only be available for employers who have fewer than 20 employees. A statutory trial period enables an employer to dismiss an employee within the first 90 days of employment and the employee is not able to bring a personal grievance for unjustified dismissal. Trial periods can only be used for new employees, must be agreed to in writing before the employee starts work and may only last for a maximum of 90 days.14 However, employees in a trial period are able to pursue other types of employment-related claims, such as for sexual harassment or discrimination.
The Employment Relations Act also recognises probationary periods, which essentially provide for a truncated performance management time frame within an employment agreement.15 An employee dismissed during a probationary period still has the right to bring a personal grievance for unjustified dismissal.
iii Establishing a presence
A company that is not registered in New Zealand cannot employ anyone to carry out business in New Zealand. Foreign companies are required to be registered on the Companies Office's Overseas Register if they are carrying on business in New Zealand under the Companies Act 1993. Registration occurs by sending the prescribed form to the Companies Office. Companies must also register with the IRD as an employer. To do so, a company must have an IRD number. Companies can automatically register for an IRD number, goods and services tax and as an employer when they are registered with the Companies Office. It is possible for an overseas company to engage a worker from a labour hire company in New Zealand. The employee remains either employed or engaged by the labour hire company, but will carry out work for the overseas company as the client. However, care needs to be taken with such arrangements, as in some circumstances the client may be deemed to be the real employer of the worker, rather than the labour hire company.
V RESTRICTIVE COVENANTS
A restraint of trade is a contractual provision that limits an employee's post-employment conduct. Depending on how it is drafted, a restraint of trade clause will typically prevent an employee from soliciting fellow staff members, clients or suppliers following termination of their employment, or prevent them from working for a competitor within a certain geographical range for a stipulated period of time.
Restraint of trade clauses are prima facie unlawful and, therefore, unenforceable. However, if a restraint of trade is reasonably necessary to protect an employer's legitimate proprietary interests and not contrary to public policy, it may be enforced by the Employment Relations Authority or Employment Court. Proprietary interests that an employer can protect include confidential information, client relationships and the stability of its workforce.
A restraint of trade should only go as far as necessary to protect the employer's interest, and be limited in scope and duration. If the Employment Relations Authority or Employment Court consider that the clause is aimed at preventing competition, rather than protecting the employer's business, it will not be enforceable. The reasonableness of a restraint will be assessed by considering the relevant circumstances at the time the restraint is agreed upon. The employee must also have received consideration for the restraint, although entry into an employment agreement will be sufficient for a new employee.
There are other provisions an employment agreement may contain that protect an employer's proprietary interests, including confidentiality and intellectual property clauses. Employees also have an implied duty to maintain confidentiality and not use an employer's confidential information for alternative purposes. When seeking enforcement of a restraint of trade provision, the Employment Relations Authority or Employment Court will consider whether the restraint is reasonable and necessary, or whether the employer's interests may be protected by these other provisions.
i Working time
There are two key pieces of legislation governing wages in New Zealand: the Minimum Wage Act and the Wages Protection Act 1983 (the Wages Protection Act). The Minimum Wage Act prescribes the minimum rates at which employees must be paid. The adult minimum wage is currently NZ$16.50 per hour. The Wages Protection Act (among other matters) provides for limited circumstances in which deductions can be made from employee wages, and stipulates that employees must provide written consent for certain deductions (other than those required at law).
There are no maximum working hour regulations that apply to the general workforce, although some industries do have specific regulations and limits (e.g., commercial drivers and airline pilots). However, an employer and employee must agree in the employment agreement that the employee will work more than 40 hours in a week. In addition, where an employee will work fewer than 40 hours in a week, there should be an effort to limit the number of days on which those hours are worked to no more than five. Health and safety laws recognise fatigue as a hazard and, as such, hours need to be monitored to manage that risk.
There are no limits on the amount of night work that may be performed. However, employees who are younger than 16 years old are not permitted to perform night work.
The law does not require compensation for overtime. Payment for overtime can be agreed to as a matter of contract in the employment agreement.
If an employee who is paid wages is required to remain available for work beyond the guaranteed hours in their employment agreement, they will need to be provided with 'reasonable' compensation for remaining available for work. For salaried employees, there will need to be express agreement that the employee's salary compensates them for remaining available for work.16
VII FOREIGN WORKERS
Employees who are not citizens or residents of New Zealand need a work visa in order to lawfully perform work in New Zealand. There are various visas available with differing durations, for example, a business visitor visa, an essential skills work visa, a specific purpose or category visa, and a resident (skilled migrant) visa. There is no obligation to keep a record of foreign workers or any limit on the number of foreign workers a business can have, as long as they all hold valid work visas.
All foreign workers are subject to New Zealand employment laws, and tax laws apply to foreign workers as they would to domestic workers.
VIII GLOBAL POLICIES
While workplace policies are not required by law, they are common. Most employers have a set of policies or an employee handbook that sets out the employer's expectations and helps the employee understand what the rules are in the workplace. Some common policies include harassment and bullying, health and safety, discipline and conduct, flexible working, privacy and internet use. Employers are able to create their own policies that best fit their business and these do not need to be filed with or approved by the government.
It is best practice to consult with employees and unions when new policies are introduced in the workplace or when current policies are amended. However, the employer must get the consent of its employees (or union if applicable) before it amends or introduces policies if they are contained in an employment agreement, the employment agreement requires employee or union consent to amend or introduce policies, or the amended or new policies contradict to the employment agreement.
Occasionally, employment agreements contain information that would usually be contained in a policy, such as disciplinary processes, internet use, privacy, or drug and alcohol testing. It is best practice for this information to be contained in separate policies, as this enables the employer to amend policies from time to time without requiring changes to the employment agreement of the employees (or union if applicable).
It is important to ensure that an employer has a good set of policies, particularly in relation to sexual harassment, bullying, and health and safety. Under the health and safety legislation, among other things, employers must ensure, as far as is reasonably practicable, the health and safety of workers and other persons. Having clear workplace policies in place is a good step in demonstrating that the employer is doing all that is reasonably practicable.
Policies do not need to be signed by employees, but employees do need to be familiar with the policies and be able to access them easily. It is common for employment agreements in New Zealand to include a provision stating that the employee agrees to be bound by and comply with all policies (as may be amended or introduced from time to time). Policies may need to be translated into foreign languages in workplaces with many foreign workers.
An employer must follow all the policies it has in place. For example, if an employer has a specific disciplinary policy that sets out a number of steps in the disciplinary process, the employer must follow those steps in conjunction with the legislative requirements.
The national languages of New Zealand are English, Te Reo Māori and New Zealand Sign Language. English is the most widely spoken language in New Zealand. It is the language commonly used in the courts and Parliament, in the education system and by the public sector.
Employment agreements and other documents do not need to be translated into an employee's native language, but if an employee does not understand the content of an individual employment agreement and the employer is aware of this, a claim for unfair bargaining could arise. Unfair bargaining occurs when an employee is significantly disadvantaged in negotiating an individual employment agreement.
If the use of English is a problem in proceedings before the Employment Relations Authority or the Employment Court, an interpreter may be required.
X EMPLOYEE REPRESENTATION
Employees are entitled to form or join trade unions. The rate of union membership is approximately one in five employees,17 and is higher in the public sector than the private sector. Union membership is particularly prominent in the healthcare, social assistance, and education and training sectors. A union must have 15 members in order to become an incorporated society and the union must register with the Registrar of Unions. The role of a union is to promote the collective interests of its membership.
It is unlawful to discriminate against an employee on the basis of union membership or for involvement in union activities.18 The Employment Relations Act actively promotes collective bargaining for a collective agreement and there are prescribed rules to govern bargaining in good faith. Where bargaining is initiated, there will be a duty to conclude that bargaining for a collective agreement unless there are genuine reasons based on reasonable grounds not to conclude a collective agreement (from 6 May 2019). When bargaining, employers and unions must meet to bargain, and consider and respond to proposals made in the bargaining. There is an obligation not to undermine the bargaining, or the authority of the representatives at the bargaining. Where there are multiple employers involved in the bargaining, the duty to bargain in good faith applies but there is no obligation to reach agreement where there are genuine reasons based on reasonable grounds not to.
Unions can elect representatives in accordance with the rules they have established. There are no legally prescribed rules on election of representatives or the length of a representative's term. Union representatives are entitled to access an employer's workplace without consent in certain circumstances, as long as there are union members at the workplace either covered by a collective agreement or bargaining towards one.19 Union representatives must be mindful of normal operating hours and follow health, safety and security procedures when accessing a workplace.
XI DATA PROTECTION
i Requirements for registration
The Privacy Act governs data protection. Employers, as agencies, are subject to this Act. While employers are not required to register with a data protection agency or other government body, they are under a duty to appoint a privacy officer, whose responsibilities include encouraging the employer's compliance with the Privacy Act and working with the Privacy Commissioner in relation to investigations.20
Under the Privacy Act, employers are bound to comply with 12 information privacy principles (IPPs), which conform to a number of international agreements.21 The IPPs are rules about the collection, retention, use and disclosure of personal information. In accordance with the IPPs, personal information relating to an employee must be collected directly from that employee (unless an exception applies), providing that it is collected for a lawful purpose that is connected with a function of activity of the employer and the collection of information is necessary for that purpose.22 The employer must take reasonable steps to ensure, among other things, that the employee knows the information has been collected, why it has been collected and that he or she has the right to correct the information.23 Further, the employer must reasonably secure the information against loss and unauthorised access or misuse.24
ii Cross-border transfers
The Privacy Commissioner has discretion to prohibit cross-border transfers of personal information.25 To exercise this discretion, the Commissioner must be satisfied on the following reasonable grounds: first, that the information is likely to be transferred from the receiving state to a third state that does not have information safeguards similar to those in New Zealand; second, that the information transfer would likely lead to a contravention of the OECD Guidelines on the Protection of Privacy and Transborder Flows of Personal Data. The Commissioner cannot exercise discretion to prohibit the transfer if the information is required by legislation or any obligation at international law.
iii Sensitive data
The term used in New Zealand law is personal information, as there is no separate definition for sensitive data. Personal information is defined in the Privacy Act as information about an identifiable individual.26 Requests for personal information by individuals about themselves are governed by the Privacy Act, but the IPPs do not apply to personal information held solely or principally in connection with an individual's personal, domestic or family affairs.
iv Background checks
Generally, offers of employment are made to prospective employees on the condition that the employer is satisfied with any background checks that the employer requires. If an employer is not satisfied with a background check, it may withdraw the offer.
Employers may check a prospective employee's references with the employee's consent. The prospective employee is deemed to give consent where he or she provides a prior employer's name and contact details in an application for employment.
Employers may also check an employee's criminal records with his or her consent. However, in certain circumstances, employees do not have to declare criminal convictions. Under the Criminal Records (Clean Slate) Act 2004, if an individual satisfies relevant eligibility criteria, they will be deemed to have no criminal record for the purposes of any question asked about their criminal record.27 This scheme, known as the 'clean slate scheme', applies to every question asked about and every request made for the disclosure of the individual's criminal record, including questions asked and requests made by prospective employers.28 The relevant eligibility criteria include, among other requirements, having completed a rehabilitation period of at least seven years since the date of sentencing, never having had a custodial sentence imposed and never having been disqualified from driving (or subject to an alcohol interlock sentence)29 in respect of certain serious driving offences.30 The clean slate scheme does not apply to individuals applying for employment in a position that involves national security, in the justice sector, as a law enforcement officer or in a role involving the care and protection of children.31
Under the Credit Reporting Privacy Code 2004, employers can only access credit information about a prospective employee with his or her consent and for the purpose of a pre-employment check for a position involving significant financial risk.32
XII DISCONTINUING EMPLOYMENT
Employment is not 'at will' and cannot be terminated unilaterally by an employer without cause. The employment laws require a lawful reason to terminate an employee's employment and any termination must be legally justified.
The test of justification is whether the employer's actions, and how it acted, were what a fair and reasonable employer could have done under all the circumstances at the time the dismissal or action occurred.33 This includes having a substantive reason for the dismissal and following a fair process in reaching the decision to dismiss. A fair process will ordinarily involve raising concerns with an employee, allowing the employee to respond and investigating the matter before reaching any decision in relation to it.
The employer must provide the employee with the notice in their employment agreement in all cases except where the termination is the result of serious misconduct. Payment in lieu of notice and working alternative duties during the notice period are permissible where these are contemplated in the employment agreement. There is no legal requirement for the length of a notice period other than that it must be reasonable. Common practice is four weeks' notice, with the exception of more senior staff, for whom it can be up to six months' notice. In the case of serious misconduct, termination without notice is permitted.
There is no requirement to notify any government agency, works council or trade union of the dismissal. There is no requirement for a social plan.
Employees can seek the remedy of reinstatement to their role in the event that they bring proceedings before the Employment Relations Authority in relation to the dismissal. There is no obligation to offer alternative employment except in a redundancy situation (see subsection ii), and there is no obligation to pay the employee severance or other dismissal indemnities.
The parties are able to enter into a settlement agreement in relation to the dismissal if they wish to agree to a waiver of claims against the other party. This agreement can be certified by a mediator from the Ministry of Business, Innovation and Employment. Where a mediator certifies a settlement agreement, the agreement is not able to be brought before the Employment Relations Authority except for enforcement purposes.
A redundancy is treated in a similar way to any other termination of employment. Therefore, the employer is required to justify the decision to terminate the contract of the employee on the grounds of redundancy both substantively and by following a fair process. The employer is therefore required to demonstrate a commercial rationale (genuine business case) for the redundancy in order for it to be justified. While redundancy is not defined in New Zealand legislation, it is commonly accepted to mean a situation where the role is or will become surplus to the needs of the employer.
A fair process in a redundancy situation will require an employer to propose the restructuring of its operations first and to seek feedback through consultation with employees. Once that feedback has been heard and considered, the decision can be reached to disestablish roles. If an employee's role is disestablished, the employer is required to consider redeployment opportunities for the employee into other roles within the business (including any roles established as part of the restructuring process).
If an employee is made redundant, there is no statutory obligation to pay redundancy compensation. However, if redundancy compensation is payable under the employment agreement, the employer will be obliged to pay it.
There is no requirement to notify any government agency, works council or trade union of the redundancy. There is no requirement for a social plan.
XIII TRANSFER OF BUSINESS
The Employment Relations Act provides protection to certain categories of employees where their employer proposes to restructure its business so that the work undertaken by those employees is carried out by a new employer.34 These categories of employees, set out in Schedule 1A of the Employment Relations Act, also known as vulnerable employees, cover employees who work in cleaning, catering, caretaking or laundry services (Schedule 1A employees). Statutory protection has been granted to Schedule 1A employees as they are usually employed to work in sectors where contracting out occurs frequently, which can have the effect of eroding terms and conditions of employment.
Where there is a transfer of an undertaking (outsourcing, second generation outsourcing or insourcing), Schedule 1A employees are entitled to elect to transfer to the new employer on the same terms and conditions of employment as with their old employer. In addition, their service is treated as continuous between the old employer and the new employer. If an employer makes any Schedule 1A employee who transferred to its employment redundant for reasons relating to the transfer, the employee may be entitled to bargain for a redundancy entitlement. If an agreement is not able to be reached, the employee can apply to the Employment Relations Authority to have the redundancy entitlement fixed by the Authority.35
Currently employers who employ 19 or fewer employees are exempt from the Schedule 1A employee transfer requirements. From 6 May 2019, the provisions will apply to all 'vulnerable employees' regardless of the size of their employer.36
For all other employees, the Employment Relations Act requires that all employment agreements have an employee protection provision, which must set out the process that an employer will follow in the event that all or part of its business is sold, transferred or contracted out. An employee protection provision generally requires an employer to negotiate with the new employer to offer employees employment.37
The amendments to the Employment Relations Act, which resulted from the passing of the Employment Relations Amendment Bill 2018, will affect New Zealand's employment law landscape in 2019. Several of the amendments impact industrial relations and, as a result, this may increase both the frequency of industrial action and the number of cases brought before the Employment Relations Authority or Employment Court concerning industrial relations. Further, the restriction on the use of 90-day trial periods and the reintroduction of reinstatement as the primary remedy for the resolution of employment disputes will have a significant impact.
It is also likely that once the various working groups convened by the government have reported back (see Section II), there may be new legislation introduced in respect of equal pay and fair pay agreements. The government's proposed solution to the issues with the Holidays Act 2003 may also become apparent, including whether the resolution will be new legislation or amendments to the current legislation. The ongoing conversation about the future of the workforce and the suitability of New Zealand's existing employment frameworks is likely to be continue, with the Employment Relations (Triangular Employment) Amendment Bill still making its way through Parliament, and the possibility that New Zealand may follow in the footsteps of the United Kingdom by introducing a third category of worker to sit in between an employee and a contractor (currently referred to by the government as a 'dependent contractor').
Bullying, harassment and appropriate corporate conduct was a significant focus in 2018 following the #MeToo movement. WorkSafe New Zealand, the country's health and safety regulator, has committed to building its capability to meet public expectations around sexual harassment and bullying, so it is likely that these issues will continue to be explored in both the health and safety, and employment space, moving forward.
1 Gillian Service is a partner and June Hardacre is a senior associate at MinterEllisonRuddWatts.
2 An important question of law is a matter that, by reason of its general or public importance, or for any other reason, ought to be submitted to the Court of Appeal (Section 214, Employment Relations Act 2000).
3 Section 4, Employment Relations Act 2000.
4 Section 4(1A), Employment Relations Act 2000.
5 Section 4(2), Employment Relations Act 2000.
6  NZEmpC 150.
7  NZEmpC 60.
8  NZEmpC 9.
9  NZEmpC 113.
10 Section 64, Employment Relations Act 2000.
11 Section 65, Employment Relations Act 2000.
12 Sections 52 and 54, Employment Relations Act 2000.
13 Section 66, Employment Relations Act 2000.
14 Section 67A, Employment Relations Act 2000.
15 Section 67, Employment Relations Act 2000.
16 Section 67D, Employment Relations Act 2000.
17 June 2016 Statistics New Zealand.
18 Section 104, Employment Relations Act 2000.
19 Section 20, Employment Relations Act 2000.
20 Section 23, Privacy Act 1993.
21 Section 6, Privacy Act 1993.
22 Section 6, principle 2, Privacy Act 1993.
23 Section 6, principle 3, Privacy Act 1993.
24 Section 6, principle 5, Privacy Act 1993.
25 Section 114B, Privacy Act 1993.
26 Section 2, Privacy Act 1993.
27 Section 3, Criminal Records (Clean Slate) Act 2004.
28 Section 6, Criminal Records (Clean Slate) Act 2004
30 Section 7, Criminal Records (Clean Slate) Act 2004.
31 Section 19, Criminal Records (Clean Slate) Act 2004.
32 Rule 11(2)(b)(iii), Credit Reporting Privacy Code 2004.
33 Section 103A, Employment Relations Act 2000.
34 Section 69A, Employment Relations Act 2000.
35 Sections 69N and 69O, Employment Relations Act 2000.
36 Section 69CA, Employment Relations Act 2000.
37 Section 69OJ, Employment Relations Act 2000.