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Don’t be an ‘April Fool’ when it comes to employment law changes

Home Insights Don’t be an ‘April Fool’ when it comes to employment law changes

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Contributed by: Kylie Dunn

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Published on: April 01, 2016

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Today, Friday 1 April 2016, sees a raft of changes to the minimum employment framework come into force.  It is worthwhile checking your organisation’s employment agreements and workplace policies to ensure you remain compliant. In particular, any employment agreements that contain a restriction on secondary employment should be reviewed.

These amendments started life as the “Employment Standards Legislation Bill” in August 2015 and were split into separate amendments Acts in time for each to be passed into law on 17 March 2016. While changes to ‘zero hour contracts’ received media attention, many other amendments have flown under the radar. 

A brief summary of the key changes to the minimum employment framework is set out below. In addition, please remember the Health and Safety at Work Act 2015 comes into force next week on Monday 4 April 2016. 

The Employment Relations Act 2000

The Employment Relations Act is amended as follows:

  • Zero hour contracts not enforceable – an employer can only require an employee to be available for work without an obligation on the employer to provide work (an “availability provision”) if:
    • The employee’s employment agreement contains guaranteed hours of work (ie – the employee must be guaranteed a minimum number of hours each week in his/her employment agreement and the requirement to be available can only relate to additional hours).
    • The employer must have “genuine reasons based on reasonable grounds” for requiring an availability provision, and these reasons must be included in the employment agreement. Notably, this is the same test that must be met for an enforceable fixed term employment agreement.
    • The employee must be paid ‘reasonable compensation’ for his/her availability, with what is reasonable to be determined by factors including the employee’s guaranteed hours, the rate of pay and any restrictions on the employee.
  • Cancellation of shifts only with reasonable notice or compensation – all employment agreements for shift workers must specify the period of notice required for cancellation of a shift, and the compensation payable if such notice is not provided and a shift is cancelled.
  • Secondary employment  an employment agreement must not prohibit an employee from working a second job unless the prohibition is for “genuine reasons based on reasonable grounds”. Such reasons must be included in the employment agreement. Some examples of permissible reasons are set out in the Act, and include protecting commercially sensitive information or intellectual property, or preventing a conflict of interest. We anticipate that some employers may want to agree a prohibition on secondary employment for fatigue risk reasons.

The Act also contains enhanced powers for Labour Inspectors (but, critically, not employees or unions) to enforce minimum entitlements through a declaration that there has been a “serious breach” of minimum entitlements. A declaration of breach triggers a range of additional orders that a Labour Inspector may seek in respect of a breach of minimum entitlements. These include:

  • Pecuniary penalty orders – this carries a maximum $50,000 penalty for an individual, or for a company, the greater of $100,000, or three times the financial gain made by the breach. It is unlawful to insure against these penalties.
  • Banning orders – this is a prohibition on a person from entering into an employment agreement, being an officer of an employer, or being involved in the hiring or employment of employees for a specified period of time (up to a maximum of 10 years).  
  • Compensation orders – an order that the person who is the subject of the breach be compensated for a breach for any loss that they have, or are likely to have, suffered.

The Parental Leave and Employment Protection Act 1987

The Parental Leave and Employment Protection Act is amended as follows:

  • Extended parental leave eligibility – eligibility for parental leave entitlements is now extended to:
    • employees who work an average of 10 hours a week in the six month period to the expected date of delivery, or assumption of responsibility of the child. Different entitlements will continue to apply, depending on whether the employee has worked for a minimum of six months or 12 months.
    • employees who assume primary responsibility for the day-to-day care of a child under the age of six years old. This is intended to capture individuals who may take primary care of a child without a formal adoption.
  • Introduction of “keeping-in-touch days” – this will allow employees to be paid for up to 40 hours of work during a period of parental leave, without being treated as having returned to work (which would otherwise trigger a loss of entitlements under the Act). A “keeping-in-touch day” can be used if both the employee and the employer have agreed, provided at least 28 days has passed since the child was born. Employees will now be able to attend training sessions or help with projects while they are on leave.
  • Negotiated carer leave – employees who are not the primary carer of a child may request a period of leave. Like flexible working arrangements under the Employment Relations Act, employers have an obligation to consider requests for negotiated carer leave, but are not required to consent. 
  • Penalty increased  the penalty for misleading, or attempting to mislead, the Ministry of Business, Innovation and Employment in relation to paid parental leave is increased from $5,000 to $15,000.

Paid parental leave entitlements will also increase from 16 weeks to 18 weeks on 1 April 2016. This is the second step in changes to parental leave announced in early 2015 (paid parental leave increased from 14 weeks to 16 weeks on 1 April 2015). 

The Holidays Act 2003

The Holidays Act is amended to strengthen the enforcement options open to a Labour Inspector in the event of a breach by an employer. Employees may now also claim penalties for breach of the Holidays Act (previously this power only lay with the Labour Inspector).

The Minimum Wage Act 1983

The Minimum Wage Act is amended to provide for greater enforcement powers to pursue employers who fail to pay employees the minimum wage for each hour worked.

The Minimum Wage Order 2016 also comes into effect on 1 April 2016 when the minimum wage in New Zealand will increase to $15.25 per hour. The ‘starting out rate’ (employees between 16 years old and 19 years old, in some circumstances) and ‘training rate’ (employees 20 years old or older who are undergoing specified training) will both increase to $12.20 per hour. 

The Wages Protection Act 1983

The Wages Protection Act is amended to:

  • confirm that an employer may rely on a general wage deduction clause in an employment agreement as consent for a deduction, but requires that consultation occurs before such a deduction is made; and
  • prohibit “unreasonable” deductions, even where consent is obtained.

Please feel free to get in touch with a member of the team if you would like to discuss these amendments in more detail.

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This publication is intended only to provide a summary of the subject covered. It does not purport to be comprehensive or to provide legal advice. No person should act in reliance on any statement contained in this publication without first obtaining specific professional advice.

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