Restructuring? Don't Start Without An EPP!
CHECKLIST: before restructuring: |
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A recent Authority determination highlights the need for employers to ensure that employment agreements contain an employment protection provision ("EPP") before undertaking any restructuring. The Authority described an EPP as a "fundamental first step" in any restructuring process as without it an employer is not in a position to know what its obligations are, let alone comply with them (Pulp & Paper Industry Council of the Manufacturing and Construction Workers' Union v Norske Skog Tasman Ltd).
The facts
The case involves the Pulp & Paper Industry Council of the Manufacturing and Construction Workers' Union ("PPWU"), a union representing approximately 190 employees of the employer, Norske Skog. The PPWU asked that Norske Skog be ordered to comply with the provisions of section 69OJ of the Employment Relations Act 2000 ("ERA"), and that Norske Skog be prevented from implementing any restructuring until such time as an EPP is contained in any employment agreement that binds the affected employees.
Section 69OJ of the ERA requires every individual and collective employment agreement to contain an EPP. The purpose of this provision is to provide protection for employees where the employer's business is restructured. Section 69OI of the ERA provides that an EPP must include: |
| Have you thought about whether your existing employment agreement/s contain an EPP?; If not: |
- what steps you need to take to amend existing employment agreements to include an EPP? and:
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- what terms to include in an EPP?
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| If your agreement/s already contain an EPP, have you thought about:
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- whether your proposed actions amount to a "restructuring"? (n.b. this is likely to include any proposal to transfer, sell, outsource, merge, reorganise etc a whole or a part of your business)
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- what steps you need to take to comply with the EPP before undertaking any restructuring?
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- whether the proposed restructuring is genuine for commercial reasons?
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- what steps you need to follow to ensure that any restructuring is carried out in a procedurally fair way and in compliance with all contractual and statutory obligations?
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Please let us know if you have any questions about the impact of this case upon your business, in particular whether you need any assistance in negotiating an EPP or with restructuring |
- a process for the employer to follow in negotiating with the new employer about the restructuring, to the extent that the restructuring relates to the employees;
- the matters that the employer will negotiate with the new employer, including whether employees will transfer on the same terms and conditions; and
- the process to be followed at the time of restructuring to determine what entitlements, if any, are available for employees who do not transfer.
Norske Skog and the PPWU were parties to a collective employment agreement covering the work performed by the PPWU wood processing employees ("CEA"). The CEA expired and the employees are now employed on individual employment agreements on the same terms as the expired CEA. Bargaining for a new collective agreement has been taking place since January 2007. During bargaining, extensive discussions have taken place regarding the form of an EPP to be included in a new collective agreement. The parties are yet to reach agreement on this issue.
In June this year Norske Skog informally raised the possibility of contracting out of wood processing with the PPWU. The PPWU and the wood processing employees told Norske Skog they would not participate in the consultation process. They said that:
- the proposed consultation regarding any contracting out was "premature" as the expired CEA did not contain an EPP; and
- the parties should first focus on bargaining for an EPP before undertaking any restructuring.
Norske Skog argued that to prevent a restructuring taking place would be "draconian, punitive, an interference with managerial prerogative and provide a significant benefit to the union". It also said that failure to agree an EPP lies at the feet of both parties and "cannot have been intended to lead to a sanction as stark as a prohibition on any action falling within the definition of restructuring…".
The decision
The Authority noted that the ERA does not set out the consequences of failing to comply with section 69OJ. It considered the previous wording of a comparable provision (section 69N ERA). That legislation allowed a 12 month grace period, at the end of which all employment agreements were to contain an EPP and specifically identified that the EPP had to be included prior to the restructure occurring. The Authority determined that the absence of a comparable section in section 69OJ was "an accidental omission".
The Authority determined that as an EPP is a "fundamental first step" in any restructuring process, it would therefore be "nonsense" for an employer to be able to restructure its business without having a provision in the appropriate employment agreement which complies with section 69OJ. The Authority said this would "cut right across" the purpose of Subpart 3 of the ERA – to provide protection to employees where their work is to be affected as a result of their employer restructuring the business.
As a result of these findings, the Authority made a compliance order in favour of the PPWU, requiring the parties to negotiate until such time as they comply with section 69OJ (ie agree an EPP in the new collective agreement). It followed that, until an EPP is agreed, Norske Skog is not to implement its proposed restructuring.
For more information, please contact:
Erin Davies
Partner
t: +64 9 979 2177
m: +94 29 622 2300
e: Erin Davies
Last updated: 16 September 2008 |
