Proposed new bill to address “zero-hour” contracts and other unfair practices

Wednesday 15 July 2015

Authors: Rob Towner and Liz Coats

​On 12 July 2015, Workplace Relations and Safety Minister Michael Woodhouse announced a number of new protections for employees that the Government is planning to introduce later this year.

The Minister advised that the proposed Employment Standards Bill (Proposed Bill) would prohibit a range of unfair practices including:

  • employers not committing to any specific hours of work, but expecting employees to be available as and when required (“zero-hour” contracts);

  • employers cancelling a shift without providing reasonable notice or compensation to the employee;

  • employers putting unreasonable restrictions on secondary employment of employees; and

  • employers making unreasonable deductions from employees’ wages.

“Zero-hour” contracts

“Zero-hour” contracts are a relatively new concept in New Zealand. Under this type of arrangement, the employer does not guarantee any hours of work, but requires employees to be available for work when this is offered to them. The key issue that unions and employees have objected to is the lack of mutuality. A typical casual employment agreement provides both that the employer is not obliged to offer work and the employee is not obliged to accept work if it is offered, but a “zero-hour” contract requires the employee to accept any offer of work yet imposes no obligation at all on the employer.

The Proposed Bill would prohibit an arrangement whereby the employer does not commit to any specific hours of work but expects its employee to be available as and when required. If an employer wanted an employee to be “on call” and available for work above their contracted hours, then there would need to be “reasonable compensation” provided for that.

However, the Proposed Bill would not define what “reasonable compensation” was. Rather, employers and employees would be encouraged to agree on what “reasonable compensation” is as part of the terms and conditions of their employment agreement. The Minister has suggested that a retainer could be one way to compensate on-call workers, but this might not be appropriate in some industries.

Cancelling shifts

The Proposed Bill would prevent employers from cancelling an employee’s shift or sending an employee home part-way through a shift without providing the employee with compensation. Employers will be required to either give employees more notice before cancelling work or compensate them for late notice. Again, although employers will be required to provide “reasonable notice”, this will not be defined by the law.

Restrictions on secondary employment

In some situations, employers have been criticised for using “zero-hour” contracts which not only require the employee to be available for work without any guarantees of work from week to week, but also prevent the employee from working for any other employer. The Proposed Bill would prevent employers from restricting secondary employment for employees, unless there is a genuine reason based on reasonable grounds to do so. The Proposed Bill will not prescribe what those grounds might be, but these will be related to the risk of loss to the employer of knowledge, intellectual property, or competitive advantage.

Deductions

The Wages Protection Act already provides that employers may not make deductions from employees’ pay except in certain circumstances specified in that Act, or with the employees’ consent. The Proposed Bill will make it clear that employers cannot deduct money from employees’ pay for losses that the employee had no control over and no contribution to through negligence. For example, an employer cannot deduct money from an employee’s pay for the value of theft committed by customers.

What next?

The Government’s expressed intention behind these proposed changes is to retain flexibility, but also provide greater certainty (particularly for employees). The Labour party and union leaders have expressed concern that the changes do not go far enough, and that rather than banning “zero-hour” contracts outright, the Proposed Bill will simply provide some new rules for how these arrangements are to be used.

Until the Bill is introduced, we cannot be certain about the likely practical implications. However, it seems that industries where “zero-hour” contracts are more commonly used (such as the hospitality industry) may be particularly affected.

Once the new law is introduced, employers will be provided with a transitional period to update employment agreements. In particular, it will be necessary for employers to review the way that their employment agreements provide for hours of work and compensation for on-call work.

Businesses which are using or considering using these arrangements should carefully consider the Minister’s announcement. Employers who do use “zero-hour” contracts will need to adjust these agreements in accordance with the new legislation once introduced. Or, it may be that there are other ways in which employment relationships can be structured that will still provide the necessary flexibility (such as a casual or fixed term employment agreement).

We will provide a further update once the Proposed Bill has been introduced.


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.

For more information
  • Rob Towner

    Partner Auckland
  • Liz Coats

    Senior Associate Auckland
Related areas of expertise
  • Employment and workplace safety