Significant changes to employment standards imminent

Tuesday 22 March 2016

Authors: Tim Clarke, Rob Towner and Anna Codlin

​​​The Employment Standards Legislation Bill passed its third reading on 10 March 2016 with near unanimous support in Parliament. The Bill now forms the basis of five separate amendment Acts which on Friday received the Royal Assent. The Acts come into force on 1 April 2016:

  • Parental Leave and Employment Protection Amendment Act 2015 (Parental Leave Amendment Act)

  • Employment Relations Amendment Act (No 3) 2015 (ERA Amendment Act)

  • Holidays Amendment Act 2015 (Holidays Amendment Act)

  • Minimum Wage Amendment Act 2015 (Minimum Wage Amendment Act)

  • Wages Protection Amendment Act 2015 (Wages Protection Amendment Act)

We set out some of the key changes that are introduced by the Acts below.

Zero-hour contracts prohibited

So called “zero hour” contracts are prohibited. These are contracts which do not provide any guaranteed hours but require workers to be available to accept work without compensation for being required to be available.

The ERA Amendment Act provides that a provision requiring an employee to make themselves available to accept any work from their employer (an availability provision) may only be included in an employment agreement if the agreement provides guaranteed hours of work to the employee.

An employer must have genuine reasons based on reasonable grounds to include an availability provision in the employee’s agreement. In those cases, an employee must be paid reasonable compensation for being available for work under the provision (irrespective of whether work is provided).

Employees may refuse to perform work above their guaranteed hours of work unless their employment agreement contains an availability provision.

Addressing unfair employment practices

Cancellation of Shifts

The ERA Amendment Act prevents an employer from cancelling an employee’s shift unless that employee’s employment agreement specifies:

  • a reasonable period of notice that must be given before a shift is cancelled, and

  • an amount of reasonable compensation that is payable if a shift is cancelled without this period of notice.  

The employee must be paid for the shift in full if their shift is cancelled and:

  • the employee’s employment agreement does not meet the requirements above, or

  • the employee is not notified of the cancellation until the commencement of the shift, or

  • the shift is cancelled after the shift has begun.

Secondary employment

Limitations are placed on an employer’s ability to prohibit or restrict an employee from obtaining secondary employment. The ERA Amendment Act provides that an employment agreement must not include a provision which prohibits or restricts an employee from performing work for another person unless:

  • the employer has genuine reasons based on reasonable grounds for the restriction or prohibition,

  • these reasons are stated in the employment agreement, and

  • the specific restriction or prohibition is necessary, having regard to the reasons for which the provision is included. 

Deductions

The Wages Protection Amendment Act prohibits an employer from making deductions that are “unreasonable”, regardless of whether the employee has consented to the deduction. In addition, an employer must now consult with an employee prior to making a specific deduction pursuant to a general deductions clause in the employee’s employment agreement. 

Parental leave entitlements

The Parental Leave Amendment Act extends parental leave entitlements to more workers, and increases the scheme’s flexibility by:

  • extending parental leave eligibility to all “primary caregivers”, which is defined to include any person who takes permanent primary responsibility for the care, development and upbringing of a child under the age of six,

  • extending parental leave eligibility to those undertaking non-standard working arrangements such as casual and fixed term employees, self-employed persons, and workers who work for more than one employer or who have recently changed jobs, 

  • removing the requirement that all unpaid extended leave be taken in one continuous block, and allowing an employer and employee to agree that the employee will return to work between periods of extended leave,

  • introducing “keeping in touch days” to allow employees to work up to 40 hours during their 18 weeks’ paid parental leave, for example, to complete training or work handover prior to returning to work, and

  • providing an entitlement to a preterm baby payment when a baby is born prematurely.  

Enforcement of employment standards

Together the Acts enhance the enforcement of minimum employment standards in a number of significant ways by:

  • introducing tougher sanctions for the most serious breaches, including public declarations of breaches; banning orders of up to 10 years preventing a person from employing or being involved in the hiring of employees; and higher maximum penalties (up to NZ$50,000 in the case of an individual and up to the greater of NZ$100,000 or three times the financial gain from the breach in the case of a body corporate).

  • extending liability for breaches of certain minimum entitlements to persons involved in the breach, including officers (directors, partners and other individuals occupying comparable positions which allow them to exercise significant influence over the management or administration of the person in breach); and

  • requiring employers to keep records that are detailed enough to demonstrate compliance with minimum entitlement provisions, including in relation to the hours worked each day in a pay period, and the pay for those hours.

Transition period

The changes outlined above come into effect on 1 April 2016. All employment agreements entered into (or which come into force) after this date must comply with the new standards.

There is a transition period for existing agreements. Employers have until 1 April 2017 to ensure that all existing individual employment agreements comply with the zero hour contracts, cancellation of shifts and secondary employment requirements.

New Health and Safety Good Governance guideline for directors

The Institute of Directors and WorkSafe NZ has published a second edition of the 2013 publication Health and Safety Guide: Good Governance for Directors. The revised guide focusses on the due diligence duty owed by officers under the Health and Safety at Work Act 2015 and supports officers with practical guidance and leadership in health and safety governance. While compliance with the guide is voluntary, it may be taken into account by a court as evidence of any breach.


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
  • Tim Clarke

    Partner Auckland
  • Rob Towner

    Partner Auckland
  • Rachael Brown

    Partner Wellington
Related areas of expertise
  • Employment and workplace safety