In the first series of Employment Essentials, we explore key topics in employment law including employee/independent contractor classification, employer health and safety obligations, Privacy Act requests and breaches, and restructuring processes.
Episode One: Independent Contractors
Please note this is a transcript version of a video, which you can view here.
In New Zealand, being an employee gives people some important rights under the Employment Relations Act. This includes the right to raise and pursue a personal grievance, and have access to a suite of minimum entitlements.
However, if you're an independent contractor, you don't get those same protections and entitlements under the Act. Instead, your rights will depend on the terms you've agreed to in your contract.
This makes the question of employment status an important one.
With new ways of working being driven by technological change, how we determine the question of employment status is being put to the test.
Determining employment status
Currently, the way we determine someone's employment status is outlined in section six of the Employment Relations Act. But the details of how that section applies comes from case law.
The Court of Appeal has now decided that the process to determine employment status should be broken into two stages.
Stage one: Involves identifying the parties' mutual rights and obligations as a matter of reality. To do this, you need to assess the written and oral terms of the contract between the parties and then consider how the relationship operated in practice. The courts will then consider the common intention of both parties, looking at it objectively based on their dealings.
Stage two: Is about determining whether those rights and obligations amount to a contract of employment. That involves applying a series of well-established common law tests to the circumstances of the case. These tests are referred to as the "control test", the "integration test" and the "fundamental test". These are used to determine whether traditional markers of employment are present in a working relationship.
- The control test looks at how much control the alleged employer has over the individual, including regarding how work is performed;
- The integration test investigates whether the work the employee does is fundamental to the alleged employer's business and whether the individual is 'part and parcel' of the organisation; and
- The fundamental test looks at whether the individual is in business on their own account.
Unsurprisingly, these tests have received considerable attention from the courts in the last few years. This has impacted various industries including courier drivers, catering workers, Uber drivers and even the residents of Gloriavale.
Legislative changes
The Government has clearly recognised some of the challenges in determining employment status, especially with today's modern work arrangements.
Workplace Relations and Safety Minister, Brooke van Velden, recently announced that she intended to amend the Employment Relations Act to bring greater certainty for independent contractors and businesses.
To further this aim, the Government has proposed introducing a new "gateway test" which, if satisfied, would mean that an individual is an independent contractor and would be unable to challenge their status. If they do not satisfy the gateway test, the current 'real nature of the relationship' test continues to apply.
Under the gateway test, a person will be an independent contractor if:
- there is a written agreement with the worker, specifying they are an independent contractor;
- the business does not restrict the worker from working for another business (including competitors);
- the business does not require the worker to be available to work at specific times or for a minimum number of hours, or alternatively, the worker is not prevented from subcontracting the work; and
- the business does not terminate the contract if the worker does not accept an additional task or engagement.
An ongoing issue
With a Bill expected in 2025, we aren't likely to see any imminent changes from the existing test and there are many details which have yet to be addressed. For now, we expect this issue to continue to be on the radar for businesses with contractor workforces.
Episode Two – Health and Safety
Please note this is a transcript version of a video, which you can view here.
New Zealand's regulatory framework for workplace health and safety is the Health and Safety at Work Act. The legislation covers all work and workplaces in New Zealand. There can be significant consequences for failing to comply with the Act which includes obligations on businesses, officers and workers. In general, it's important for businesses to understand the relevant health and safety obligations and what the particular risks and hazards are that arise in their particular workplace.
Health and Safety obligations
Under the Health and Safety at Work Act, the primary duty holder is a "person conducting a business or undertaking", or PCBU. Other people with duties include officers (for example company directors), workers, and "other persons" at the workplace, such as visitors.
There can be confusion about whether a PCBU has duties in a given situation. A good rule of thumb here is that if the PCBU is doing something as part of its business, it has duty to do that safely, whatever the activity is. And if you are working with other PCBUs, you need to coordinate with them to make sure that overlapping risks are being well managed.
PCBUs have duties to three groups of people:
- Workers who are working for the PCBU (this includes contractors and volunteers);
- Other workers who are not working for the PCBU but are under the influence of, or are directed by, the PCBU; and
- Other persons who might be at risk from the work.
The primary duty under the Health and Safety at Work Act is to ensure, so far as is reasonably practicable, the health and safety of workers and other persons.
This requires a PCBU to eliminate risk where that is reasonably practical and if you can't eliminate the risk, you must minimise it.
This involves, among other things, providing a safe work environment, safe plant and structures, and safe systems of work, as well as providing information or training to workers and monitoring the health of workers and of the working conditions.
PCBUs also have duties to manage risks arising from the workplace that it manages or controls, independently of the risk of the work itself.
It's important to involve workers in these decisions and you may need extra specialist help as well.
It's also important to remember that health and safety includes health, and that work-related health conditions are a significant issue in New Zealand. And it is easy to forget that health includes mental health – so the same duties arise for mental health as for physical safety.
Health & Safety obligations of employers
For employers, it's important to know that health and safety obligations are also implied into all employment agreements. This obligation - to provide and maintain a safe workplace - is informed and given content by New Zealand's health and safety legislation.
This means that employers have an obligation under employment law, as well as under the Health and Safety at Work Act, to provide and maintain a safe place of work. This includes addressing psychosocial risks to mental health such as bullying, overwork and fatigue, and work-related stress.
An employer who fails to provide a safe workplace could face a claim for breach of contract and/or a personal grievance in the employment jurisdiction, in addition to enforcement action by the regulator, WorkSafe. Depending on how the claim is framed, an employer could end up liable for damages and penalties for breach of contract, compensation for hurt and humiliation, and potentially loss of wages.
The Minister for Workplace Relations and Safety, Brooke van Velden, has undertaken to reform the work health and safety regulatory system.
Consultation open to businesses, workers and the public ended on 31 October and we are yet to see exactly what the reforms will look like. However, the Minister has made it clear that all options are being considered, ranging from amending the existing legislation and regulations to introducing completely new law – so, watch this space.
Summarising Health and Safety
It's clear that there is a lot to consider when thinking about health and safety obligations and much will depend upon the risks and hazards associated with a particular workplace. Given the potential upcoming changes to the framework, there are likely to be even more questions about how businesses should be managing their risks and hazards in the workplace. Feel free to get in touch if our team can help.
Episode Three – Privacy and Employment
Please note this is a transcript version of a video, which you can view here.
The Privacy Act 2020 applies to personal information about an identifiable individual. There's 13 information privacy principles set out in the Act which govern the use of personal information collected by an agency.
Privacy Act requests
Information privacy principle six of the ACT gives people the right to ask an agency to provide, amongst other things, the information it holds about them. Interestingly, these types of Privacy Act requests are becoming increasingly common as a tool for employees to use when bringing claims against their employers.
An employer that receives the request must respond to it as soon as possible, but within 20 working days. That doesn't mean that the information itself must be provided within this timeframe, just that an employer needs to confirm that it does hold the information requested and it will be provided or confirm that it doesn't hold the information or does not hold it in a way that is readily retrievable.
A request can be refused for a few specific reasons. In our practice, the most common grounds we see employers relying on are:
- where the information is considered evaluative material and sharing that information would reach a promise, whether explicit or implied, made to the person who provided it. For instance, feedback given by a referee on a confidential basis would fall within this exemption, or;
- if sharing that information would lead to the unwarranted disclosure of someone else's private affairs. For example, where the material contains sensitive or confidential information about another employee.
In some cases, it may be sufficient to simply redact some of the information rather than withholding it altogether.
Dealing with Privacy Act requests can be a costly and time-consuming exercise for employers. It can also require an employer to hand over unhelpful information or documents which an employee can use as evidence in a claim against the employer. Bearing this in mind in the course of employment processes can be useful.
Privacy breaches
If you send somebody's personal information to the wrong party or somebody gets access to the personal information when they shouldn't have done, or you are subject to a cyber-attack, there's a high likelihood that you've suffered a privacy breach under the Privacy Act. A privacy breach can include circumstances such as information from within the employer's organisation being hacked or leaked internally or externally.
Often that's due to human error. It could just be an internal error in terms of somebody sent the wrong email to the wrong person, or it could be a lot more serious in terms of a major cyber-attack where all of your customers information or your employee's information has been accessed.
Just because you have a privacy breach under the Privacy Act doesn't necessarily mean you have to notify someone, but if it is a notifiable privacy breach, then you do have to notify the Office of the Privacy Commissioner, and you can just do that online. It's relatively straightforward, but you also have to notify all affected persons, which is a bit more complicated.
Now, there's no distinction made under the Act between the types of affected persons. It can be employees or customers of the business. But what I would say is often businesses will forget to actually take into account their obligations in relation to their own employees, and they just focus straight on the impact of their customers.
The Act defines a notifiable privacy breach as 'a privacy breach that is reasonable to believe has caused serious harm to an affected individual or individuals or is likely to do so'. The Office of the Privacy Commissioner has suggested that employers are expected to seek legal advice and make their own judgment call on whether a potential breach should be notified.
My experience is that's easier said than done. Whether something actually reaches the serious harm threshold or is likely to do so can be really difficult to make, especially in real time when you are time pressured and you have potential significant impacts from a PR perspective, and in terms of how you engage with your employees.
The requirements that it is reasonable to believe a breach has caused serious harm is a mixed subjective and objective test. Essentially, an employer needs to genuinely believe that the privacy breach has caused serious harm or is likely to do so, but the belief also needs to be based on objective reasonable grounds.
There are different types of examples of a notifiable privacy breach, but examples that we typically see in our practice are:
- somebody sending the wrong email to the wrong person and that email might contain health, finance or other sensitive information. If they haven't encrypted any attachment containing that information, then chances are that that's going to be a notifiable privacy breach.
- Telling a third party about an applicant who's applied for a job at your organisation. The chances are that applicant wouldn't have wanted their current employer to know about that information, and that would be a notifiable privacy breach.
- Somebody sharing information about an appraisal to a wider group, perhaps the whole team, when really that information should be kept confidential between HR and the person who's being appraised.
- A wide-scale cyber-attack - that means a third party has had access to the employee's information and your customer's information and, and they've either put it onto the dark web or they've been able to access it for their own purposes.
Summarising Privacy and Employment
Failing to notify the Officer of the Privacy Commissioner where a notifiable privacy breach has occurred is an offense. So that's quite serious, and that can result in a fine of up to $10,000. Importantly, that essentially means the clock starts ticking once you become aware of the privacy breach and the Privacy Commissioner expects you to notify them within 72 hours of becoming aware of the breach.
Episode Four – Restructuring 101
Please note this is a transcript version of a video, which you can view here.
One of the common effects of a downturn in the economy is employees looking at cutting costs, including by reducing headcount.
Many organisations across New Zealand have therefore been undertaking restructuring processes. This can often be a stressful process for those involved, but there are ways to make it run more smoothly.
For employers, it's important to have a good plan in place and to be aware of the legal requirements for justification and process.
Key considerations
In every restructure, there are a few key considerations for employers to keep in mind:
- Firstly, having a genuine business reason for the restructure. Common reasons might include reduction of business costs, changing business needs, and the increasing use of technology to streamline business processes. It is important that any redundancy is for genuine business reasons and that those reasons are clearly explained to employees that are within the scope.
- Secondly, the focus is on the role and not the person. The rationale for disestablishing a role should be based on the role itself and the organisation's business needs. A restructuring process should not be used to address performance or conduct issues of an employee. When preparing the business case, it is important to keep this in mind and focus on the role and not the person.
- Thirdly, fair process. It is important to follow a fair process in any restructuring. This means that any restructure proposal should not show signs of predetermination, and the employer should carry out a genuine consultation process. This involves providing a proposal to impacted employees containing all relevant information relating to the restructure and informing them that a possible outcome is disestablishment of their role and allowing each employee sufficient time and opportunity to provide feedback on the proposal. After considering the feedback, the employer can choose to either amend the proposal or continue with the restructure.
- Lastly, redundancy does not mean termination. If the employer is disestablishing a role, the affected employee's employment is not automatically terminated. The employer should consider if there are any redeployment opportunities for the employee across the organisation. This would include looking at roles that the employee could do even with some upskilling and training, and even if the employee is not the best candidate for the role. This is one of the areas that we often see employers struggling with. If there are no viable redeployment opportunities, the employer may proceed to terminate employment.
Navigating the challenges
Overall, any restructure can be a challenging process for both the business and the impacted employees.
It's important to be clear on your business rationale and to follow a proper process. Keeping an open mind throughout the consultation process is also key.
While there will often be curly issues that crop up, having the basics right will put you in a good position to deal with them.
Feel free to reach out to a member of our team if you need any help.
Goodbye for now
Thanks for joining us for series one of Employment Essentials. We hope you have a great Christmas break and we look forward to seeing you in 2025.