Employment Relations Law Reform: Contracting Out
Businesses that win contracts may soon have to employ the outgoing
contractor’s 'vulnerable' employees on the same terms and conditions,
if those employees wish to transfer. The Employment Relations
Amendment Bill 2006 (introduced into Parliament in February 2006) proposes
amendments to Part 6A of the Employment Relations Act (ERA). This section
deals with vulnerable employees such as those in cleaning services
and food catering, as well as certain workers in the health, age-related
care and education sectors.
Subsequent Contracting
A subsequent contracting situation is where a contract between a principal
and a contractor, who has employees performing the work, ends and is
awarded to a new contractor. In this situation, the Bill clarifies
that:
- 'Vulnerable' employees have the right to transfer to the new employer/contractor
on the same terms and conditions of employment;
- Affected employees have a right to transfer even if the new contract
does not begin immediately. However, there must be a causal
link between employment ending and the work moving to the new employer;
- Affected employees have a right to transfer regardless of whether
the principal awarding the contract has ever performed work in-house;
- The right of transfer to the new employer applies when the work
is already subcontracted or will be subcontracted.
Fixed Term Employment Agreements
Potentially significant changes involve 'vulnerable' employees employed
on fixed term agreements linked to the term of the contract for services. Where
a contract comes to an end or where the employer is intending to contract
out work or sell its business in the future, the employee will have
the right to elect to transfer to the new employer, even though their
fixed term has ended. Where the work is brought in-house, the
employee may be employed on an indefinite basis.
Other Changes
The Bill will also establish that:
- Employees have the right to transfer even where the new contractor
is not currently an employer or does not intend to have employees
perform the work;
- If employees who transfer are 'surplus to requirements', those
employees will have the right to bargain for redundancy entitlements
with the new contractor;
- If only part of an employee's work is to be transferred to a new
employer or contractor, that employee is entitled to remain with
their current employer for the part of the work that is not being
performed by the new employer, and to transfer to the new employer
for the part of the work that the employer will be performing (i.e
they may end up working part-time for more than one employer);
- The employment of an employee who elects to transfer is continuous
for the purposes of their statutory entitlements, including holiday
pay.
Implications For Employers
- If you decide to carry out work in-house, you may be required to
employ the contractor’s employees
- If you win a contract, you may be required to employ the losing
contractor’s employees
- If you decide to contract out work, affected employees may transfer
their employment to the contractor
- The price at which tenderers are willing to perform the contract
may increase, given the potential costs involving employees
The Bill has been referred to the Select Committee for consideration. The
Committee will report back in August 2006. If you would like
further information, or want to make a submission, please contact us.
For more information, please contact:
Erin Davies
Partner
t: +64 9 979 2177
m: +64 29 622 2300
e: Erin Davies
Last updated: 22 June 2006
This article is intended to be brief in nature and should be used for information only. It should not be relied on as legal advice. |
