Employment Legislation Before Parliament

Last month, Prime Minister John Key announced a number of changes to the Employment Relations Act 2000 (ERA) and Holidays Act 2003 (HA) as part of the new employment law package.

This week, Labour Minister, Kate Wilkinson, introduced the Holidays Amendment Bill and the Employment Relations Amendment Bill (No 2) to Parliament. The proposed changes, which include the extension of the 90-day trial period to all businesses and to allow workers to cash up the 4th week of their leave, have already been fiercely debated in the media. This debate continued when the Employment Relations Amendment Bill (No 2) had its first reading yesterday. The Holidays Amendment Bill is scheduled for its first reading next week.

The Employment Relations Amendment Bill (No 2)

This Bill amends the ERA and, if enacted, most of it will come into force on 1 April 2011.  The key changes proposed under the Bill are as follows:

Union access to workplaces

Amending the rules on union access to workplaces, so that any access is subject to the employer's consent and such consent cannot be unreasonably withheld.  This change is intended to increase levels of choice and fairness for employers by enabling them to regain more control over who is on a worksite, and when.  Currently, a union representative may exercise a "right of entry" at reasonable times and in a reasonable way.

Communications with employees during bargaining

The Bill clarifies that employers are able to communicate directly with employees during collective bargaining (including the details of any proposed agreement), subject to the overriding duty of good faith.

Personal grievances – extending the 90-day trial period

Extending the current 90-day trial period from employers with less than 20 employees to all employers.

Personal grievances – amending the justification test in section 103A

By substituting the word "could" for "would" in the test of justification, the Bill will require the Authority or Court to recognise that there is a range of fair and reasonable actions that an employer could take in any situation.  See our recent article on this important change.

Removing reinstatement as the primary remedy

Removing reinstatement as the primary remedy for unjustified dismissal, but it will remain a possible remedy in dismissal cases.  Labour Minister Wilkinson claims that reinstatement is "seldom awarded" and that, in the majority of personal grievance cases, the damage to the employment relationship is irreparable.

Mediators and Authority members to make recommendations on resolution

Empowering these institutions to help the parties to a grievance claim or dispute with recommendations (eg the process for resolution or even terms of settlement).  The parties will not be bound by any recommendations, but their options are not limited if they do not accept the recommendations they have requested.

Changes to the functions of employment institutions

The Bill includes the following:

• Allowing the Authority to award penalties for obstructive or delaying behaviour;
• Clarifying that mediators should be involved in early problem resolution, including the provision of mediation services over the telephone and where parties are not legally represented;
• Clarifying that a mediator will not be able to sign agreed terms of settlement that would have the effect of breaching a party's minimum entitlements;
• Clarifying that parties can avoid mediation in certain circumstances (eg where impractical or inappropriate in the circumstances);
• Allowing the Authority to "filter out" frivolous or vexatious cases;
• Establishing the statutory right of cross-examination.

The Transport and Industrial Relations Select Committee is to report back to the House by 15 November 2010 and submissions are due by 13 September 2010.

Click here for the Employment Relations Amendment Bill (No 2)

The Holidays Amendment Bill

This Bill amends the HA and is intended to "improve the overall operation and efficiency of the [HA]".  The Bill makes the following changes to the HA:

4th Week Leave "cash up"

Allowing employees to "cash up" up to a maximum of one of their four weeks of statutory annual leave entitlement.  The same rate of pay is to be used for paying out or taking annual holidays.  Cashing up will be permissible only at the employee's request, but employers cannot be pressured to agree to a request for a payout.  Employers may have a policy that the employer does not have to consider an employee's request to have a portion of his or her annual holidays paid out.

Calculating pay for public holidays, alternative holidays, sick and bereavement leave

Introducing a new calculation referred to as "average daily pay" to replace the current 4 week averaging formula provided in section 9(3) of the HA.  The averaging formula may be used when it is not possible or practicable to determine what the employee would have earned or where an employee's daily pay varies within the pay period in which the holiday or leave falls. 

Transferring observance of public holiday to another day

Employers and employees may agree to transfer public holidays because of the operational needs of the employer or the individual needs of the employee.  This amendment allows an employer and a group of employees to, say, agree to observe Waitangi Day (which falls on a Wednesday) on the Friday.  The amendment also allows an employee to observe a public holiday on another working day that holds religious or cultural significance for the employee.

Allowing employers to direct when alternative holiday must be taken

This amendment replaces the current provision that allows an employee to decide when their alternative day is to be taken.  Under the amendment, employers must give employees at least 14 days' notice of the date on which the employer requires the alternative holiday to be taken.

Additional criteria for determining what would otherwise be a working day

Amending section 12(3) of the HA by adding a "but for" test.  This does not change the meaning of what would otherwise be a working day.

Proof of sickness or injury within 3 days

Allowing employers the right to request proof of sickness or injury at any time (including within the first three calendar days of leave).  The amendment will remove the current requirement for an employer to first have "reasonable grounds" to suspect that sick leave is not genuine.  Employers are still required to meet an employee's reasonable expenses in obtaining the proof.

Employee entitlements during closedowns

The Bill clarifies that, if a public or alternative holiday, or a sick or bereavement leave day, falls during a closedown period, then employees are entitled to be paid for that leave if the day/s would otherwise be a working day for the employee.  Labour Minister Wilkinson says that the HA was not intended to have the effect that all days within the closedown period could be agreed to be treated as not otherwise working days.

Increasing penalties for non-compliance

Labour Minister Wilkinson says that the current penalty provisions in the HA are not adequately deterring non-compliance.  The penalties will increase to a maximum of $10,000 for individuals and $20,000 for companies.

New definitions for "discretionary payment" and "allowances"

These new definitions are intended to ensure that discretionary payments and allowances are better understood and applied correctly, for the purposes of the HA.

If the Bill is enacted, section 7(2) of the Bill (the "but for" test and clarification around entitlement for leave during closedowns), will come into force the day after Royal assent is given.  The rest of the Bill will come into force on 1 April 2011.

The Transport and Industrial Relations Select Committee's report and the deadline for submissions will be scheduled after the Bill’s first reading, which is likely to be next week. 

Click here for the Holidays Act Amendment Bill.

Pdf version

Our Employment Law Services

For more information, please contact:

Last updated: 20 August 2010

The contents of this publication are general in nature and are not intended to serve as a substitute for legal advice on a specific matter. In the absence of such advice no responsibility is accepted by Brookfields for reliance on any of the information provided in this publication.