What employment law changes are coming?

Jack Rainbow, Associate at Dundas Street Employment Lawyers, outlines the upcoming law changes and what HR professionals need to be preparing for now.

The Government has proposed a series of changes that could significantly change the employment law landscape in Aotearoa New Zealand. While many of these proposed reforms are still in development, businesses must be aware of the potential changes and what they may mean for them.

INCOME THRESHOLD FOR UNJUSTIFIED DISMISSAL

The Government is proposing to remove the right of employees who earn over $180,000 per year (base pay) to raise a personal grievance for unjustified dismissal.

This proposal appears to have been inspired by similar provisions in Australian legislation that prohibit the ability of high-earning employees from pursuing unfair dismissals. However, as a result, an increase has occurred in other types of claims and litigation brought by high-earning employees who are otherwise prevented from challenging their dismissals.

While New Zealand’s proposal places a cap on high earners, the parties are free to “opt back in” to the personal grievance scheme, or negotiate their own procedures regarding dismissals and include those in their employment agreements. Minister van Velden has announced a 12-month transition period during which parties to existing employment relationships affected by this proposal can negotiate those employment agreements to provide their own contractual protections.

Whether employers will actively opt back into a scheme that will increase their own potential liability remains to be seen.

Changes To Remedies

The Government is also proposing changes to how the Employment Relations Authority and Employment Court deal with remedies to personal grievances.

The current legislation allows the employment institutions to reduce any remedies awarded to an employee for “contributory conduct”, where part of the fault lies with the employee. This ability to reduce remedies, in the eyes of the Government, is not applied frequently enough and subsequent case law has found that there can be no 100 per cent reduction in remedies based on the fault of the employee.

The Government wants to change that by requiring the employment institutions to take greater account of the employee’s behaviour when considering remedies. While this proposal is not fully developed, the Government is considering removing remedies entirely where serious misconduct has occurred and requiring the courts to consider whether the employee’s behaviour obstructed the employer’s ability to act as a fair and reasonable employer.

These changes could significantly affect how employers manage formal employment processes regarding serious misconduct allegations. If an employer is confident that serious misconduct has occurred, they might opt to conduct a lessthan-fair dismissal process in the knowledge that the employee is at fault.

This would mark a major shift from the current principles of natural justice and good faith in New Zealand employment law and poses a risk to employers of getting it wrong if, when challenged, the serious misconduct is not made out.

EMPLOYEE OR CONTRACTOR?

A significant amount of litigation has challenged the status of contractors who believe they are employees, and this has caused significant confusion and uncertainty for employers, employees and contractors.

To remedy this, the Government has proposed introducing a ‘gateway test’ to demonstrate whether a worker is an employee or a contractor.

This proposal test will consist of four criteria. If a working arrangement meets all of them, the individual will be classified as an independent contractor, with no further investigation needed. However, if the working arrangement fails to meet any of the four criteria, the existing legal test for determining employment status, based on “the real nature of the relationship”, will continue to apply.

If the proposal gateway test is introduced, it will enable businesses and contractors to ensure that their arrangements are appropriately classified by reference to the test, providing certainty and clarity for those involved. However, the test as currently proposed is limited, and for all those working arrangements that would fall outside of that test, the current uncertainty based on the existing legal test would remain in place.

Holidays Act 2003 Reform

The Government is continuing its predecessor’s work to fix the multitude of problems associated with the Holidays Act 2003, which have cost New Zealand businesses millions in remediation costs based on years of failing to interpret and apply the Act correctly.

Currently, the Act entitles employees to a minimum of four weeks paid annual holidays after 12 months of continuous employment. The Government now proposes moving to an hours-based accrual system, rather than weeks, meaning holiday accrual would depend on the number of hours worked each week instead of days.

An accrual system based on hours, rather than weeks, has several potential benefits, including ensuring proportionality for those working varying hours, and greater flexibility allowing employees to take smaller leave increments rather than full days.

The Government has indicated that it wishes to implement the changes before the end of its current term. However, with the ongoing reform now having taken over seven years since it began, there is doubt as to how quickly new legislation can be prepared, introduced and passed into law.

Other Changes

Beyond these reforms, the Government is considering a raft of other proposed changes, including:

• reintroduction of pay deductions for partial strikes, allowing employers to reduce an employee’s pay where the employee is participating in a partial withdrawal of labour

• termination of employment by agreement, allowing employers to make an offer of an exit settlement, which an employee could not use as the basis for a personal grievance has strong experience in industrial relations, dispute resolution and providing highlevel, strategic advice. He partners closely with his clients, providing advice and assistance from start to finish on a range of complex matters.

• employee remuneration transparency, meaning employers could no longer include ‘pay secrecy’ clauses in employment agreements prohibiting employees from discussing their pay with others.

Many of these proposed changes are still in development or draft bill form and likely subject to further change before (or if) they pass into law. However, given the Government’s ambitious scope of proposed reform, it is essential employers keep an eye on these developments and consider how they might affect their businesses and practices.

Jack Rainbow, Te Arawa (Tapuika), Ngāti Tūwharetoa, is an Associate at Dundas Street Employment Lawyers. Jack has strong experience in industrial relations, dispute resolution and providing highlevel, strategic advice. He partners closely with his clients, providing advice and assistance from start to finish on a range of complex matters.