In December, a number of changes were made to employment legislation, in line with the new coalition Government’s employment law agenda. We summarise below the key changes that employers should be aware of and potential changes on the horizon for 2024.
Statutory 90-day trial periods
The Employment Relations (Trial Periods) Amendment Act 2023 came into force on 23 December 2023. This Act amended the Employment Relations Act 2000 (ERA), and means that businesses of all sizes can include a 90-day trial period in employment agreements for new employees. Previously, 90-day trial periods were only available to employers with fewer than 20 employees.
Where a valid trial period is used, an employer may dismiss an employee during or at the end of the trial period, with the protection that the employee may not raise a personal grievance for unjustified dismissal, or bring any other proceedings relating to that dismissal.
However, an employee dismissed during a 90-day trial period may still bring other claims, such as unjustified disadvantage or discrimination claims, provided that the claim does not relate to the dismissal. Therefore, it is important that employers carefully consider how a trial period dismissal is carried out to mitigate the risk of these other potential claims.
Cases regarding statutory 90-day trial periods highlight that there is little room for employer error when it comes to drafting or applying these provisions. Some key points to bear in mind are:
- the employment agreement must specify in writing that the employee is bound by a 90-day trial period;
- the 90-day trial period provision must comply with the ERA requirements, including setting out when the trial period commences, its duration, and the fact that an employee may not bring a personal grievance or other legal proceedings relating to any dismissal during the trial period;
- 90-day trial periods can only be included in employment agreements for new employees. The employee must not have previously been employed by that employer (whether on a temporary or a permanent basis). This requirement also means that the employee must sign the employment agreement, and accept the trial period clause, before commencing employment. If an employee signs an employment agreement containing a 90-day trial period after commencing employment (even if on the same day as commencing employment), that employee is unlikely to be a ‘new’ employee;
- the employer must provide advance notice to the employee if they wish to dismiss the employee under a 90-day trial period:
- notice must be the amount as set out under the 90-day trial period provision in the employment agreement; and
- notice can be paid in lieu if this is expressly provided for in the 90-day trial period provision;
- 90-day trial periods do not override the statutory duty of good faith. Employers must not mislead or deceive employees and must continue to be responsive and communicative, even during a trial period. For example, if an employee asks why an employer is considering terminating them pursuant to a 90-day trial period, the employer must be upfront with them about this.
A further update since 90-day trial periods were last available to all employers is that accredited employers cannot use 90-day trial periods if they are employing individuals on an Accredited Employer Work Visa.
It is also important to diarise when the 90 days expires; dismissing an employee pursuant to an otherwise valid 90-day trial period provision on day 91 is too late.
No more Fair Pay Agreements (FPAs)
The Fair Pay Agreements Act 2022 (FPA Act) was repealed on 20 December 2023.
The FPA Act was only in force for one year and no FPAs were finalised during this short time. The repeal of this Act means that there is no longer any avenue for FPAs to be sought or bargained for. All of the other more established, collective and individual bargaining processes remain available.
Worker Protection (Migrant and other Employees) Act 2023 (WPME Act)
The WPME Act came into force on 6 January 2024. The WPME Act introduces an offence and penalty regime to deter employers of migrant workers from breaching their legal obligations.
Under the WPME Act, immigration officers and Labour Inspectors have the power to request documents from employers regarding their migrant employees. Requested documents may include wages and time records, leave records, or any other document relating to the remuneration or employment conditions of a migrant employee. Employers must respond within 10 working days of these requests.
If an employer fails to provide the requested documents to an immigration officer and / or Labour Inspector, a Labour Inspector may issue an infringement notice and fees of NZ$1,000 per offence, up to NZ$20,000 within a 3-month period. The Employment Relations Authority may also award a penalty of up to NZ$20,000 against a company or corporate body. Individuals convicted of migrant exploitation under the WPME will also be barred in future from managing or directing a company.
Potential changes on the horizon
The Government’s coalition agreements indicate that further reform to employment law will be explored over the next three years.
Potential reforms signalled in the coalition agreements include:
- Disqualifying contractors engaged pursuant to an independent contractor agreement from claiming that they are employees;
- Setting an income threshold for raising personal grievances;
- Barring employees from being able to claim remedies for a personal grievance where they are at fault;
- “Moderate” annual increases to minimum wage rates;
- “Reform [of] health and safety law and regulations.”
Details regarding these potential reforms are yet to be released.
It is unclear what action the Government may take on the Holidays Act reform, after the previous Government accepted all 22 recommendations of the Holidays Act Taskforce and legislative drafting was underway prior to the election. Similarly, it remains to be seen if any amendments to the parental leave legislation might be proposed, after National Party’s Deputy Leader, Nicola Willis’ private member’s bill (allowing paid parental leave to be split between parents and taken at the same time) was voted down by the Labour Party prior to the election last year.
It is going to be an interesting year on the employment-law front, and we will keep you updated regarding these potential reforms if and when they are developed.
If you have any questions regarding these recent employment law changes or potential changes on the horizon, please get in touch with your usual Bell Gully adviser or a member of the Bell Gully Employment Team.