Employers who don't update their agreements could face several risks, including being unable to enforce clauses, receiving personal grievances claims (if the employer attempts to rely on a non-compliant clause), and having penalties imposed on them for non-compliant employment agreements.
In our experience, few employers are aware of the far-reaching implications of these changes and most employment agreements do not comply with these requirements.
The "availability provision" nightmare
The new hours of work and "availability provision" requirements are particularly stringent, and have produced a number of unintended consequences.
Previously "standard clauses", which require an employee to be available for "reasonable overtime" or "additional hours as necessary to perform the functions of the role", are now unlawful and unenforceable unless certain requirements are met.
If an employer wishes to have the ability to require an employee to perform additional hours of work above their agreed minimum hours, the employee's employment agreement must include an "availability provision" which meets the requirements of the ERA. In particular:
the employer must have genuine reasons based on reasonable grounds to include a clause requiring an employee to be available for additional hours,
the number of additional hours that the employee is required to be available must be stated in the clause (the employer must have genuine reasons based on reasonable grounds for the number stated), and
the employee must be paid reasonable compensation for making themselves available for those additional hours (irrespective of whether those hours are actually worked).
An employee is entitled to turn down or refuse to work any hours which are not guaranteed to them in their employment agreement, or which do not fall within an availability provision which meets the requirements set out above.
Other common compliance issues
The issues don't end here. Many employment agreements contain "conflicts of interest" clauses which, among other things, purport to prevent an employee from taking up employment with another employer. Clauses which restrict secondary employment (or an employee's ability to perform work for another person) are now unlawful unless:
the employer has genuine reasons based on reasonable grounds for restricting secondary employment in the manner provided for in the clause, and
those reasons are stated in the clause.
In our experience, it is very rare for a conflict of interest clause or secondary employment clause to meet these requirements, unless it has been specifically reviewed in light of the ERA amendments.
Furthermore, to be able to cancel an employee's shift, an employment agreement must contain a "cancellation of shifts" clause. If an employment agreement does not contain a cancellation of shifts clause which meets the ERA requirements, the employer is prohibited from cancelling an employee's shift, and if it does so, it must pay the employee in full for that shift.
So what's the risk?
If a non-compliant employment agreement is not updated to comply with the recent amendments, the non-compliant clauses will be unenforceable.
This means that an employer may not be able to:
require employees to be available to work outside their standard work hours,
enforce any restrictions on employees' ability to undertake secondary employment, or
cancel an employee's shift.
If an employer attempts to rely on a non-compliant clause, the employee may bring a personal grievance claim.
Additionally, the employer could be liable for a penalty of up to $20,000 in any action brought by a Labour Inspector or an employee pursuant to the ERA.
Next steps for employers
Many employers are currently in the process of updating, or have updated, their employment agreement templates to ensure compliance with these requirements. However, with the transitional period coming to an end (less than one month to go), it is also important that employers are looking to move existing employees onto compliant employment agreements.
This process can be very time consuming, and an employer cannot require an employee to sign a new employment agreement - employees must agree to the proposed changes. Factors for employers to consider are:
the extent of the changes necessary, and whether the changes could be made by a variation letter rather than a new agreement,
whether consideration (such as a pay-rise or "sign on" bonus) is necessary,
whether changes would best be made at salary review time to incentivise employees to accept the changes, and
the best way to explain the changes to employees.
Our experienced employment team regularly advises employers on how to comply with the ERA amendments.
If you have any questions regarding any of the issues raised in our article, please contact us.