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Government restructuring set to continue in 2012
Indications from the Prime Minister at a press conference on Monday confirm plans to further revamp the public sector during a second term in power. Late last year, the Government signalled that significant restructuring was likely over the next three years, with some significant announcements to come in 2012. Details of the overhaul are to feature in a speech by the Prime Minister scheduled within the next three weeks.
Already in the pipeline is a merger of "back office" functions in the Treasury, State Services Commission and Department of the Prime Minister and Cabinet to form a new shared services unit from next month. In addition, proposed job losses in Te Puni Kokiri were announced two weeks ago aimed at downsizing the department.
During National's first term, public sector numbers fell by more than 2,000 overall. Public service departments already streamlined include Inland Revenue, Department of Conservation, Ministry of Defence and Fisheries Ministry (which was folded back into the Ministry of Agriculture and Forestry last year). Affected Crown entities include Housing New Zealand and the Tertiary Education Commission.
What's in store for 2012?
Government initiatives to deliver a public surplus for the 2014-15 financial year and improve public sector performance are the driving forces for further change. Cabinet projections in June 2011 forecast 500 further job losses in core government administration (comprising most public service departments and 5 specified Crown entities) over the two year period to June 2013.
Indications are that no public sector stone will remain unturned. Plans for rationalisation include further mergers, shared or outsourced back office administration, reviewed accountability and reporting lines and greater emphasis on online services. Backroom functions likely to see change include human resources, IT, communications and accounting. The State Sector Act 1988 and parts of the Crown Entities Act 2004 have also been earmarked for review.
The law on restructuring in the public sector
The State Sector Act 1988 (the Act) governs public and education services. Under the Act:
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There is an express statutory obligation to be a "good employer". (Good employer obligations are replicated in a number of statutes governing employment in the state sector, including the Crown Entities Act 2004 which applies to Crown entities).
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The Employment Relations Act 2000 (ERA) applies (except as specified otherwise). This means that statutory good faith obligations under the ERA apply to public service restructures, and specifically the obligation to consult where there is a proposal that is likely to have an adverse effect on the continuation of employment of one or more employees.
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Department chief executives have a right, subject to conditions contained in the relevant employment agreement, to remove an employee from their employment at any time.
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Where staff are surplus to requirements, chief executives have certain statutory powers to transfer employees within or between departments, again subject to the terms of the employees' employment agreements.
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Consultation with an employee is required before any transfer appointment is made. The courts have defined consultation for this purpose as "communication of a genuine invitation, extending with a receptive mind, to give advice".
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An employee who transfers to another department as a result of their duties being transferred there is entitled to no less favourable conditions of employment.
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Where there is a transfer of functions from one department to another, the Governor General may order for certain other provisions set out in the Act to apply. These provisions (among other things) clarify which collective agreement should apply following the transfer, and restrict compensation for technical redundancy where an employee is offered "equivalent employment" or accepts other employment in the new department. Equivalent employment for this purpose is defined as employment in substantially the same position, in the same general locality, on no less favourable terms and conditions, and treating service as continuous.
Particular care should be taken in relation to formulating and conducting any process that could result in an employee's dismissal. Following the Employment Court's decision in Vice-Chancellor of Massey University v Wrigley & Kelly last year, it is likely that all employers will be expected to provide more information to employees and consult more comprehensively with employees affected by a restructuring proposal (see our May 2011 newsletter).
Typically, collective employment agreements (which govern most public servants) and individual employment agreements in the public sector contain comprehensive provisions for surplus staffing, restructuring and/or management of change.
Such contractual provisions will prevail over the statutory power to transfer employees in the event of surplus staffing referred to above, and should be adhered to carefully. Terms commonly seen in public sector employment agreements include selection criteria, relocation/reassignment obligations and technical redundancy provisions (disentitling employees to compensation in certain circumstances). Such terms may well be scrutinised or challenged by employees subject to a restructuring.
For further information, please contact your usual Bell Gully adviser or:
Rob Towner
Partner
Disclaimer
This publication is necessarily brief and general in nature. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.
