For sometime, there has been confusion as to what can be included in minimum wage calculations so as to meet the requirements under the Minimum Wage Act 1983 (the Act). Many farmers offer their employee’s on farm accommodation and other benefits such as firewood, meat, wet weather gear and milk as part of their employment. Can you include benefits to make up any shortfall in the minimum wage (currently $14.25 an hour)?
In an effort to clarify the above, the Ministry of Business, Innovation and Employment (MBIE) has recently released a Position Statement that clarifies MBIE’s views and sets out how Labour Inspectorates will deal with accommodation and other goods and services in the agricultural industry, when ensuring that the requirements of the Act are met.
Deductions
Generally an employer must pay the entire amount of wages to the employee, without deduction. However, an employer can deduct monies from an employee with their written agreement. Example deductions include the provision of accommodation and other goods and services such as firewood and animals. In order to make these deductions, they must be agreed to in writing (ideally in the employment agreement), and the agreed price must be reasonable (or in the case of accommodation, market rent).
Can Accommodation and Benefits be included in Minimum Wage Calculations?
MBIE has confirmed that if a Labour Inspectorate comes knocking on your door and they are looking at whether the minimum wage is being paid they will treat accommodation and other goods and services as follows:
The agreed value of the accommodation will be included as wages for the purposes of calculating the minimum wage;
The agreed value of other non-cash benefits such as firewood and meat will not be included as wages for the purposes of calculating the minimum wage; and
Where expressly authorised by the employee, the employer may deduct the agreed cost of the benefits (eg. firewood and meat) from wages before they are paid and they will be included as wages for the purpose of calculating the minimum wage.
We remind you that it is vitally important to keep track of all hours worked and leave records for your employee’s. All wage records should include the wages payable to the employee before any deductions are made for the agreed value of the accommodation or other goods and services.
We recommend that you seek advice from your accountant as to the tax implications of deducting accommodation and other goods and services from wages.
Disclaimer: We remind you that while this article provides commentary on employment law topics, it should not be used as a substitute for legal or professional advice for specific situations. We recommend that you obtain legal advice specific to your situation before proceeding and would be happy to help in this regard.
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A recent decision by the Employment Relations Authority (ERA) has highlighted the high financial cost of breaching the minimum employment law standards following investigation by a Labour Inspector. Employers need to be aware that the Inspectorate is well resourced and proactively looking into minimum employment standards, including record keeping. Media attention this week on the new statistics that 1 in 10 employees do not have written employment agreements signals that this attention on “the basics” is set to continue.
Case summary
Sun 2 Moon Limited employed Mr Singh in its grocery store. Mr Singh claimed that he was required to pay a sum of $11,727.22 in instalments to the company. It was explained to him that he was required to ‘invest’ in the business to secure his position and obtain assistance for his permanent residency application. The ERA concluded that this payment was a premium which is prohibited under s12A of the Wages Protection Act 1983.
As the company did not have adequate wage and time records, the Labour Inspector determined that Mr Singh was not paid the correct minimum wage rate for the period of his employment. He also was not paid holiday pay or the correct payment for working public holidays.
Mr Singh was awarded a total of $28,781.23 for payments owed to him, including re-imbursement for the penalties previously paid.
The company was also ordered to pay more than $25,000 in penalties for its absolute failure to comply with Minimum Wage Act 1983, Employment Relations Act 2000, Wages Protection Act and Holidays Act 2003.
What records must an employer keep?
All employers must keep written wage and time records, including the following, in relation to each employee:
Name, postal address, age (if under 20 years) and the date they started working.
If they’re on an individual employment agreement or a collective agreement (and the title and expiry date of the agreement and the employee’s classification) and a copy of the agreement.
The kind of work they are employed for.
The number of hours worked each day in a pay period and the pay for those hours
Details of any employment relations education leave taken.
The wages paid in each pay period and how these have been calculated.
The dates they last became entitled to annual holidays and sick leave and their current entitlement to annual holidays and sick leave.
The dates of leave taken, including annual holidays, sick leave and bereavement, and payment received for each.
Any annual leave cashed up as well as the date and amount paid for each entitlement year.
The dates and number of hours worked on public holidays and the payment for these; the date (or 24-hour period) the public holiday or any part of it has been transferred to, and the date the employee became entitled to any alternative holiday (day-in-lieu).
The dates of, and payments for, any public holidays or alternative holidays they didn’t work but were entitled to holiday pay.
The cash value of any alternative holidays they gave up for payment.
The cash value for any board and lodgings provided.
The date when employment ended, and the amount of holiday pay they received at the end of employment.
A copy of their tax code declaration (IR330).
If you would like to know more about record keeping requirements, or would like them reviewed to ensure they are compliant, please contact us.
Disclaimer: We remind you that while this article provides commentary on employment law and health and safety topics, it should not be used as a substitute for legal or professional advice for specific situations. Please seek guidance from your lawyer for any questions specific to your workplace.
Many economists are predicting difficult global market conditions in 2016, and this has been borne out already in some sectors including dairy farming. Given this, having to make people redundant for whatever reason may be a possibility for many businesses.
The law relating to redundancy has become significantly more complicated over the last several years, and reaching redundancy decisions is riskier than ever. Ensuring that there is a clear plan at the outset of the restructuring, and the business case for the proposed change is well thought through, will assist in avoiding or, worst case scenario, defending, any dispute.
Legal framework
Redundancy decisions must be justified in accordance with the Employment Relations Act 2000 (Act), and particular good faith obligations apply under the Act too in respect of restructuring processes. In short, this means employers must be able to demonstrate that:
there was a genuine business reason for making a role redundant, (e.g. financial reasons such as a decline in sales); and
a full and fair consultative process has been followed, by which the affected employee has been given a fully informed opportunity to provide feedback on the proposal to make their role redundant before it is implemented.
What does fair process involve?
Once you have determined the genuine business reason for making employees redundant, you then need to ensure that you follow a fair process. A brief overview of this process, which usually takes a minimum of two weeks to complete, generally involves:
Developing a written proposal which outlines what is proposed, and why, including any selection criteria and redeployment options. The document should outline what the consequences should be if the proposal was accepted and finally, key dates within the overall timeframe for completion of the redundancy process.
The proposal should then be presented to employees at a meeting, with emphasis on the proposed nature of the change (ie, no decisions have been made!) and feedback invited over a reasonable period of time and in an appropriate format (this will depend on the circumstances but should usually be received at a one to one meeting where the employee is represented or supported if they wish).
Feedback then needs to be considered and responded to, before the consultation process is concluded with announcement of the final decision to all affected employees and their representatives.
A selection process should then commence, if applicable. Otherwise redundant employees should be given notice of termination, with confirmation of any other entitlements per their employment agreement or applicable policy.
Then, once affected employees’ employment has terminated, the new structure may be implemented.
Conclusion
While the redundancy process can be tricky to manage, ensuring you work within the current legal framework will assist you in achieving the best possible outcome for your business and employees. There are myriad possible redundancy scenarios, and we recommend seeking advice before embarking on this kind of change, given the complexity involved in the law, and the need to ensure you’re taking the right steps in the circumstances.
Disclaimer: We remind you that while this article provides commentary on employment law topics, it should not be used as a substitute for legal or professional advice for specific situations. Please seek guidance from your employment lawyer for any questions specific to your workplace.
A raft of new regulations to support the Health and Safety at Work Act 2015 (Act) were released recently, covering general risk and workplace management, worker engagement, participation and representation, major hazards, asbestos, as well as infringement fees and more specific topics like mining and adventure activities.
The control hierarchy has shifted significantly from the “eliminate, isolate, minimise” framework which applies under the current law. From 4 April 2016 when the Act comes into force, controls must be applied, in order of preference dependent on what is reasonably practicable in the circumstances, as defined below:
Elimination: This must always be the first option when trying to manage any risk. Only if it is not reasonably practicable to eliminate a risk can you then look at minimising the risk. You must minimise the risk by taking one or more of the following actions that is most appropriate and effective when taking into account the nature of the risk:
Substitution: substitute the hazard giving rise to the risk with something that gives rise to a lesser risk. E.g. instead of using an acid based cleaning solution, use an organic product with no harmful side effects. Practically, the result of this form of substitution is elimination of risk.
Isolation: isolate the hazard, to prevent anyone coming into contact with it. “Isolation” is any form of barrier between a person and a hazard. E.g. Many carparks now have a metal barrier for pedestrian walkways, isolating vehicle hazards and preventing risk of harm by contact between cars and shoppers.
Engineering controls: these are mechanic or structural controls such as sound proofing, guards or interlocks. E.g. where working with compressed air with a compressor in the same building where people work, engineering controls like sound proofing could minimise the risks created by the compressor’s noise.
Administrative controls – training and procedures: If none of the above controls can be implemented, or can’t be implemented straight away, administrative controls should apply. E.g. retraining, supervision, and rotation of workers performing repetitive tasks, to minimise hazard associated risks.
Personal protective equipment (PPE): The last control option is PPE. The rationale for this being a final resort is that PPE’s reliability to prevent harm is dependent entirely on a person doing the right thing every single time, yet mistakes are inevitable. E.g. in a job that discharges chemicals to the atmosphere, for example, spray painting or asbestos removal, forgetting to change a respirator (PPE) filter could be fatal. An engineering control such as a filtered extraction system would remove reliance on PPE for safety.
In order to rely on control measures to meet obligations under the Act, a PCBU implementing any control measure must ensure that it is effective and lowers the risk rating for the hazard identified. The control measure must be fit for purpose, suitable for the nature and duration of the work, and installed, setup and correctly used.
PCBUs must also review, and if necessary, revise, control measures, to maintain a work environment without risks to health and safety and to achieve the ultimate aim of the Act – continual improvement to health and safety.
Kate Ashcroft is a Principal with Copeland Ashcroft Law, an independent legal practice providing specialist advice, representation and support across the full ambit of employment and health and safety law, to businesses throughout New Zealand. Why us? Put simply, as specialists in employment and health and safety law, we know our stuff. That means we efficiently assist you with pragmatic and specific advice, to suit your needs. We know what works, and we partner with you to achieve the results you want, so you can get on with business. See www.copelandashcroft.co.nz for details.
Changes to various pieces of employment legislation came into effect on 1 April 2016. We wrote about the changes here https://www.copelandashcroft.co.nz/news/zero-hour-contract-restrictions; https://www.copelandashcroft.co.nz/news/employment-standards-legislation-bill-passes
All employers need to understand the new law and update their employment agreements to ensure they comply with it. We’ve compiled the FAQs below to help with that. For specific advice about how the changes apply to your business and what you need to do to comply, please contact one of our team.
Hours of work
Q I don’t guarantee any hours of work – will I now have to offer guaranteed hours of work?
A No, you and your employee can agree not to guarantee any hours of work in the individual employment agreement. However, this means that all hours of work will be by agreement, so that the employee can decline to perform work at any time.
Q What happens if I want my employee’s to be able to do work when I need them?
A If you want to make sure that an employee is able for work when you need them, you need to offer them a guaranteed number of hours per week/fortnight. Provided that your business needs justify requiring employees to be available to do extra hours, you may also use an availability provision.
Q What should be in hours of work clause?
A You will need to include any or all of the following in your hours of work clause:
The number of guaranteed hours of work- these can be specified over a week or fortnight depending on your roster patternThe days of the week on which the work is to be performed;
The start and finish times of work;
If you require your employee to be flexible on the days of the week they will work and/or their start and finish times.
Q What is an availability provision?
A It specifies the additional period (outside of the guaranteed hours of work) where an employer requires an employee to make themselves available for work if required, eg for a certain number of hours or for a more general period such as weekends, evening etc. Where you use an availability provision, the employee is required to make themselves available during this period of time if they are needed. An employer must have a genuine business reason to use an availability provision, and must also pay an employee reasonable compensation for making themselves available.
Q Why would you have an availability provision?
A If it is impractical for you to meet your business demands without having employee’s available to work on short notice then you may use an availability provision.
Q What is reasonable compensation for availability?
A The legislation is not specific about this, but lists a number of factors to take into account in setting compensation. You will need advice specific for your circumstances, but as an example, we have clients using a number of solutions, including:
an additional sum of money added to an employee’s regular pay per week;
half the hourly rate for each hour they agree to be available;
minimum wage rate for each hour they agree to be available; or
an additional paid day off each week.
Q I pay my employee a salary – do I also need to pay reasonable compensation for expecting my employee to be available outside guaranteed hours of work?
A This will depend on the way your hours of work clause is drafted. You may not need to pay additional compensation provided you are not breaching the Minimum Wage Act 1983.
Q What happens if I don’t have an availability provision in my employment agreement?
A You will not be able to require an employee to work additional hours without their agreement.
Q We have guaranteed hours in the employment agreement already and have an agreement with our employees that they can work extra hours if work is available. Do we have to change our employment agreements?
A Not necessarily. If both parties are ok to continue with the current arrangement, then your employment agreement does not need to change. An availability provision is only needed where an employer has to have employees available at certain times to respond to business demands.
Q I have an employee who refuses to work outside of their guaranteed hours – is there anything I can do?
A If you are finding that your business demands have changed and you need someone to be available for certain periods of time during the week, then you may wish to consider introducing an availability provision to your individual employment agreements. Otherwise, you cannot force an employee to be available outside their work hours. The new legislation also states that you cannot treat that employee adversely just because they refuse to work extra hours, if there is no availability provision.
Q To meet business demands we often need to cancel shifts if required, can we still do this?
A Yes, provided you give your employee reasonable notice of the shift being cancelled. The amount of notice you are required to give should be specified in your employment agreements. Specific advice should be sought about what this will mean for your circumstances, but as a guide, in order to determine what reasonable notice would be, you need to consider:
what effect the cancelled shift will have on the employee;
the nature of the business, including whether you can control or foresee the circumstances that would prevent a shift from happening;
whether you have any agreed or guaranteed hours of work in the agreement
Q What happens if we don’t give the correct amount of notice before cancelling a shift?
A You will be required to pay your employee reasonable compensation. The amount of compensation should be specified in the employment agreement. If you don’t have a clause in your agreement that specifies what will be paid to the employee for cancelling a shift, then you need to pay the employee their usual relevant or average daily pay.
Deductions
Q I heard that I need to have an employee’s written permission before I make deductions from their pays – is that correct?
A Yes, you need to have an employee’s written permission to make deductions from their pay; this has not changed. A clause in the employment agreement which states that you are entitled to make reasonable deductions will be sufficient written permission, unless it is revoked by the employee. However, you now need to consult with the employee before you make a deduction from their pay, even if you have their written permission. You should seek advice about what consultation is required, but in many cases this may be a simple email to the employee advising that you will be deducting $x amount from their pay this week/fortnight/month and the reason for that, inviting their comment within a set timeframe, before the deduction is made.
Secondary Employment
Q Can I still refuse to allow my employees to take on another job?
A It depends, the Employment Relations Act 2000 now states that an employer cannot restrict an employee from taking secondary employment unless there is a genuine reason and this is set out in the employment agreement. A genuine reason may include, for example:
Protecting an employer’s commercially sensitive information;
Protecting an employer’s intellectual property rights;
Protecting an employer’s commercial reputation;
Preventing a conflict of interest.
Q There are a lot of changes I will need to make to my employment agreements and it is already May 2016 – am I in breach of the legislation?
A No, there is a transitional period for all existing employees and you have until 1 April 2017 to ensure all employment agreements are adhering to the new legislation. However, all new employee’s employment agreements must reflect the new changes.
Disclaimer: We remind you that while this article provides commentary on employment law topics, it should not be used as a substitute for legal or professional advice for specific situations. Please seek guidance from your employment lawyer for any questions specific to your workplace.
The New Zealand Government is considering the addition of a corporate manslaughter offence to the Health and Safety Reform Bill currently before Parliament.
In 2012, on the back of two of New Zealand’s largest industrial tragedies, the Pike River Mine explosion and the CTV building collapse in Christchurch, proposals were presented in Parliament to discuss the introduction of a corporate manslaughter charge to the Crimes Act 1961.
Corporate manslaughter is a crime in the UK, Australia, Canada and Hong Kong. It allows for a culpable corporation to be censured and punished by the law for conduct that leads to a person’s death. In Australia it is referred to as “industrial manslaughter”. The New Zealand Government has been lagging behind on pushing for the amendment, but it seems that this soon may change.
The Government has now confirmed plans to consider whether to add corporate manslaughter provisions into the Health and Safety Reform Law currently before parliament. Workplace Relations Minister Michael Woodhouse said
“There’s already a strong sanctions regime, but I’m certainly open to having a look at the suggestion around corporate manslaughter,” Woodhouse stated.
If passed, the legal mandate will allow firms to be prosecuted and fined for deaths that occur at the workplace.
Justice Minister Amy Adams mentioned the need for a clearer pathway for private prosecutions against companies whose workers have died as a result of a serious lack of health and safety precautions.
“It’s my view that the most natural place for this is as part of the Health and Safety reform legislation,” she said.
“There is a huge gap in the current health and safety legislation with no provision in the legislation as it stands for a corporate manslaughter charge,” Green Party co-leader Metiria Turei said.
It is no doubt that employee participation is a significant factor in good workplace health and safety, but having sound rules and regulations in place at your work place helps immensely in preventing workplace tragedies.
It is our advice that as an employer, you should review your current health and safety systems and policies to ensure they are up to date and take every nuance of your employee’s safety into account. This should include how to work safely, manage hazards and having designated health and safety officers to inform and advise other workers. Staging regular training sessions regarding emergency response protocols (fire drills, earthquake warnings etc.) are also a necessity in your place of employment and represent a sure fire way to mitigate the worst when disaster strikes.
Are you confident you are operating a safe and healthy workplace, and paying the minimum ACC premiums necessary? If not, we can provide you with guidance on how to develop and implement a health and safety management system, tailored to your needs, including:
Reviewing your safety systems at work and advising of any necessary safety improvements
Providing training to staff on the Health and Safety Management Plan and practices
Helping you to achieve the ACC Workplace Safety Management Practices standards to qualify for ACC discounts
Helping you establish Employee Participation Schemes
Providing some practical tools to manage claims for Workplace Stress.
Disclaimer: We remind you that while this article provides commentary on employment law topics, it should not be used as a substitute for legal or professional advice for specific situations. Please seek guidance from your employment lawyer for any questions specific to your workplace.
By Lucia Vincent
Employees cost employers cash. Not just wages, but the risk involved when dismissing staff, can cost businesses more than they bargained for. Personal grievances, irrespective of merit, can cause considerable expense to defend. Even if an employer successfully defends itself, the legal fees and loss of time and productivity (not to mention the stress for those involved), all add up. When offered an alternative, like engaging contractors, one can appreciate why a weary employer sees it as an attractive option. But doing so solely to avoid employees won’t always work.
Considering the Alternative
Fear of or attempting to avoid personal grievances does not justify engaging an employee as a contractor. Even if you agree with an individual that you will contract their services and not employ them directly, an individual may still be recognised and subsequently, successfully claim they were an employee. Learning why and how to appropriately engage contractors becomes crucial if a business is to avoid unwittingly ending up employing someone anyway.
Selecting the Right Relationship
Knowing what you require and recruiting the right person, whether a contractor or employee, is essential. Otherwise good working relationships can too often be ruined by failing to select the right relationship in the first place.
We all know the benefits hardworking, talented and committed employees bring to a business. You can rely on the implied obligations of good faith and fidelity. Staff must consistently act in their employer’s best interests, follow all lawful and reasonable instructions, and cannot do anything that actually or is likely to undermine the relationship of trust and confidence. An employer may control and hold an employee accountable for their work and time, insist on undivided loyalty to their business, and discipline any untoward behaviour, keeping in mind the requirements of fairness and reasonableness.
But an employer must also consider and comply with many implied obligations. An employee automatically enjoys many minimum entitlements that a contractor does not. Employment legislation requires an employer to pay at least the minimum wage and provide paid holidays and leave. The consequences of failing to comply can be significant and is worth considering and calculating.
A contractor may provide specialist skills that a business requires urgently or only temporarily and that would not otherwise be available in an employment relationship or for the timeframes and budgets needed. For example, you may engage the services of a consultant who retains the flexibility to work at times that suit them and for other businesses. You can legitimately limit the timeframes without having to comply with the requirements of casual and fixed term employment arrangements too.
In contrast to employees, contractors work for themselves. They usually supply their own staff and equipment. They can be GST registered and take care of their own insurance and taxes. Under a contract for services (rather that a contract of service), contractors are not automatically entitled to paid leave and holidays. A business can generally terminate the relationship much more easily than with staff. The remedies for breaching a contract for services are more likely to be something like damages for beach of contract without recourse to employment law.
Disputing the Difference
As with any relationship, it can become complicated. If parties begin arguing over what type of relationship they are in, the Employment Relations Authority or Employment Court can decide for you.
Under section 6 of the Employment Relations Act 2000 (Act), the Authority or Court must determine the real nature of the relationship, after taking into account all relevant matters that indicate the intention of the parties. Although parties might have a contract that says someone is a contractor, the Authority or Court could find otherwise because it is more concerned with “substance than with form.” 1
All relevant factors include any common intention of the parties as shown by a contract or how the relationship operated in practice, the integration of the individual into the business, the control exercised over and by the business over an individual, any industry practice and/or taxation matters, and ultimately, whether an individual is truly in business on their own account.
In a case involving movie making and a set model technician, the Employment Court considered a relationship to be of an employment nature despite the technician being referred repeatedly to as a contractor in a written contract.2 Key to the technician’s success in claiming to be an employee was the control exercised by the employer over hours of work and how work was done, the provision of most tools and equipment and the availability of discretionary sick leave. The technician had worked as an integral part of the business and was not in business for himself like a contractor would have been.
After the Government’s swift response to Hollywood’s threatened exodus from New Zealand, a presumption now exists that those engaged in film production work are not employees. The Act expressly excludes certain persons in relation to a film production unless a person is a party to, or covered by, a written employment agreement that provides for the person being an employee. Real estate agents, volunteers and sharemilkers also have special exclusions.
But it would be impossible to provide an accurate or exhaustive list of what types of relationships may be considered that of employee and/or contractor. It will always depend on the facts of the case and the application of the law.
Talking about it
Someone recently asked me whether their boss could force them to be a contractor. But it wasn’t really a question I could give a yes or no answer to. After being teased about being a typical lawyer who couldn’t give a straight answer, I explained I was making sure I properly understood the situation before giving advice (otherwise you may as well flip a coin). After asking a few probing questions and receiving reluctant responses, I established the real problem – the two just hadn’t talked. They had both assumed the other felt the same way about their relationship and didn’t bother to discuss it let alone record it in writing. Months down the track, an awkward conversation about who should be paying tax and providing holidays, has caused them both much anxiety and cast doubt on the future of their relationship. The two could have easily avoided all that by talking about it at the start.
Getting it Right
The same logic applies to your working relationships. Establish what your business needs and go about getting it. If you need someone devoted to your business that you can train and retain to grow with you – then you probably need dedicated and loyal staff. If you urgently and briefly need specialist expertise that you don’t have in-house, contractors can provide that service to you. Easy.
Next, record it in writing. While there is not always a legal obligation to record your contractor’s agreement in writing, it would be helpful to have a common understanding in a contract that you can discuss if you dispute something down the track. Employees of course must have a written agreement. But do drill down to what the real nature of the relationship is – just having a document that records that the relationship is one or the other won’t trump reality. Monitor the relationship over time and if things change, update your agreement. If in doubt, seek advice – think of it as an investment that reduces the risk of getting it wrong.
References
32, Koia v Carlyon Holdings Ltd (2001) 6 NZELC 96, 407
Bryson v Three Foot Six Ltd (2003) 7 NZELC 97, 317
Disclaimer
We remind you that while this article provides commentary on employment law topics, it should not be used as a substitute for legal or professional advice for specific situations. Please seek guidance from your employment lawyer for any questions specific to your workplace.
Copeland Ashcroft Law prepares a quarterly newsletter, In Touch, with Progressive Consulting. In Touch keeps our clients and the public aware of recent developments in employment law and human resource management.
In Touch (May 2013)
In Touch (August 2012)
In Touch (May 2012)
In Touch (December 2011)
In Touch (June 2011)
In Touch (February 2011)
In Touch (March 2010)
Some of our earlier editions are also available – just click on the links below.
Our March 2010 edition of In Touch discussed several employment law issuses. Click here – to read this edition.
Our December 2009 issue of In Touch covers key issues including protecting privacy – CCTV and Harnessing Holiday Hullalaboo. Click here – to read this edition.
Our September 2009 edition of In Touch outlined address the key Employment the recent changes to mobile and motor laws and introduced Julia Shallcrass and our new Queenstown office. Click here – to read this edition.
In Touch during March 2009 discussed several employment law issues. Click here – to read this edition.
The Christmas 2008 edition of In Touch addresses that timely question – the Christmas office party, the antics accompanying it, and how to manage the presence of drugs and alcohol in the workplace. Click here – to also read about how to restructure in the current economic climate without exposing yourself to claims of unjustified dismissal and/or disadvantage.
Our July 2008 newsletter introduces readers to that vital management tool – the Myers Briggs Type Indicator, discusses restraints, and highlights recent legislative changes. Click here to view our July 2008 newsletter.
Our March 2008 newsletter dealt with the new Minimum Wage (New Entrants) Amendment Act, that crucial interviewing process and the changes to Kiwisaver. To read more click on our link to In Touch (March 2008).
Employment law is set to change. Passed into law on 6 November 2014, the Employment Relations Amendment Act 2013 (“the Act”) will largely come into force on 6 March 2015. The following are some of the changes the Act makes that are likely to impact our employment relationships the most. With more flexibility for employers and exemptions from several obligations for smaller business, the changes promise to be good for business.
Rest and Meal Break Provisions
At present breaks are very inflexible and prescriptive. The changes allow parties to negotiate working arrangements for breaks in good faith. Employers will be able to impose restrictions where reasonable and necessary having regard to the nature of the work. If an employee misses a break then the employer will have to provide compensatory measures instead. This could mean that the employee could either start later or finish earlier or receive a payment for their missed break.
Disclosing Information in Good Faith
The changes seek to clarify disclosure requirements and create more certainty for employers about what information must be provided in processes used in employment such as consultation during a restructuring or a disciplinary investigation. Currently, all information relevant to a proposed decision that may adversely affect an employer must be provided unless “good reason” exists not to. Employees who are about to be made redundant frequently request information about other employees who are likely to remain with the company. Employees facing dismissal might request the details of an anonymous complainant.
Come 6 March next year, unless a proposed decision was notified prior, employers will not be required to provide access to confidential information (information provided by parties in circumstances where they enjoyed a mutual understanding of secrecy) if:
it would disclose another’s affairs to an unwarranted extent,
breach a statutory requirement to maintain confidentiality (such as privacy or official information), or
another good reason exists not to (such as avoiding unreasonable prejudice to an employer’s commercial position).
Collective Bargaining
Most of the new law on collective bargaining will effectively apply now because come March it will apply to all bargaining, even if the bargaining began before the Act was passed.
Concluding a Collective Agreement
Previously the duty of good faith required bargaining parties to conclude a collective agreement unless a genuine reason based on reasonable grounds existed not to. Parties could also keep bargaining on other matters even if they came to a standstill or reached a deadlock on a matter. The new law expressly states that the duty of good faith does not require parties to enter into a collective agreement or agree on anything in a collective agreement. An employer will still breach the good faith requirements if they refuse to enter into a collective agreement and the employer refuses due to being opposed, or objects in principle, to bargaining for or being a party to a collective agreement.
Declaring Bargaining at an End
The changes allow the Employment Relations Authority (“ERA”) to determine that bargaining has concluded. A party bargaining for a collective agreement may apply to the ERA where they are unable to conclude a collective agreement due to bargaining difficulties. The ERA must consider whether parties have attempted to resolve the difficulties by mediation or facilitation and may direct more of the same.
If the ERA determines bargaining has concluded there must be a declaration to that effect and no party can initiate further bargaining later than 60 days after the date of the declaration, unless otherwise agreed. If the ERA determines that bargaining has not concluded, they can make a recommendation as to the process the parties should follow to resolve the difficulties and no party can apply for a further declaration that bargaining has ended unless they have followed the recommendation. If no recommendation is made, parties still can’t apply for a declaration again earlier than 60 days after the determination unless otherwise agreed.
A new section was added at the final stages of the Bill. The ERA must dismiss an application for determination that bargaining has concluded where the ERA is satisfied that the party seeking the declaration has failed to comply with good faith unless the party has rectified the failure. If the ERA is precluded from making a declaration, they may still make recommendations or directions about steps parties ought to take including how to fix any good faith failures.
Repeal of 30 day Rule
Previously, where a collective agreement covered work of new employees in a workplace, employee’s terms and conditions during the first 30 days were those in the collective agreement and any additional terms and conditions were individually agreed. Employers previously had to advise the new employee of the above and they were penalised if they failed to comply with the requirements. The 30 day rule has been repealed.
Noticing and Valuing Strikes
Currently parties can lawfully strike or lockout without notice in industries that do not require it (essential, passenger transport and schools). The changes make striking without notice, or prematurely, unlawful. Notice of a strike must be in writing and the notice must specify the nature/timeframes for the strike e.g. the start/end date and time, or specify an event which would mark the end of the strike/lockout.
Partially Paying Partial Strikes
Changes also allow for an employer to make specified pay deductions from an employee who participated in a partial strike. A partial strike is defined as an act where the employees continue to perform some work for their employer during the strike instead of wholly discontinuing their employment during the strike e.g. refusing to do particular tasks that form part of normal duties but continuing to perform the rest of the duties.
Continuity of Employment
Changes modify when and how vulnerable employees (cleaners, caregivers and caretakers) are affected by restructuring. There are exemptions for small to medium enterprises (organisations with 19 or fewer staff) so vulnerable employees do not have the right to transfer to an employer with 19 or fewer employees. An employer who wished to be exempt must provide a warranty verifying its staffing total. Otherwise there will be an obligation on the outgoing employer to provide detailed information about the transferring employees to the incoming employer, clarification around the liability for service related entitlements and consequences for an outgoing employer who without good reason changes things to the detriment of the incoming employer e.g. landing the new employer with significant, unjustified pay rises given just before the transfer.
Working Flexibly
Currently an employee must have caring responsibilities and have been employed by their employer for at least six months before they can request a flexible working arrangement. The changes extend the right to request flexible working arrangements to all employees from the beginning of their employment relationship. The limit that employees can only have one request each period of 12 months will also be removed and the time that an employer has to consider requests will be reduced from three months to one month. Employees must make a request for flexible working arrangements in writing and the response from the employer must also be in writing.
Employment Relations Authority
The changes introduce rigid requirements on the nature and timing of determinations from the ERA. At the end of the investigation meeting the Member must, wherever practicable, give an oral determination or oral indication of its preliminary findings. The Member can only reserve its determination if they are satisfied that good reasons exist making it “not practicable”. A preliminary indication may be subject to additional information being received but there is a three month deadline.
We will keep you updated with the case law that emerges as the ERA and the Courts apply the Act and interpret the changes.
By Janet Copeland
On 1 April 2011 significant employment law changes took effect. This article summarises key legislative changes, impending changes and notable case law affecting how payroll is administered.
CHANGES TO EMPLOYMENT LAW IMPACTING PAYROLL AND HR:
Average Daily Pay
Under section 9 of the Holidays Act 2003 (“the Act”), for the purposes of calculating payment for a public holiday, an alternative holiday, sick leave or bereavement leave relevant daily pay (“RDP”) is used to determine the employee’s payment. RDP means the amount an employee would have received had the employee worked on that day.
Since 1 April 2011, where it is not possible or practicable to determine an employee’s RDP, the employer may use an employee’s average daily pay (“ADP”) to determine the amount payable. The ADP formula is set out in section 9A of the Act, where the employee’s gross earnings for the previous 52 calendar weeks are divided by the number of whole or part days the employee earned those gross earnings. The calculation includes days the employee was on paid holiday or leave but excludes any days the employee did not actually work. Where the parties cannot agree on the amount the employee should be paid, a Labour Inspector may calculate the amount for them.
Cashing Up Annual Holidays
Since 1 April 2011 an employee may ask to “cash up” some or all of their fourth week of annual holidays each year. An employee’s request must be in writing and may only occur following the employee’s first anniversary (after twelve months’ continuous employment). An employer must consider any requests within a reasonable time and advise in writing whether or not they agree. No reasons need to be given for declining a request. If the employer agrees to a request to cash up annual holidays, it must be paid to the employee as soon as practicable. Failing to comply with any of the criteria may result in the employer having to pay for holidays twice.
Calculation of the cashed up holidays must be for the agreed portion of the annual holiday entitlement and paid at a rate which is the greater of the employee’s ordinary weekly pay or the employee’s average weekly earnings for the twelve months immediately before the end of the last pay period before the annual holiday.
Transferring Public Holidays
New Zealand celebrates 11 public holidays each year. As a rule we must observe these on the dates they fall and cannot transfer them. Since 1 April 2011 parties could agree to observe a public holiday on a different date if the agreement was recorded in writing and identified the details of which public holiday is to be transferred and the new calendar date (it cannot be the date of another public holiday).
Entitlements to time and a half and an alternative holiday fully transfer to the new calendar date of any transferred public holiday. Failing agreement on when to take any alternative holidays, an employer may choose when an employee may reasonably take alternative holidays.
IMPENDING CHANGES:
On 1 April 2012, the adult minimum wage increased from $13.00 to $13.50 per hour. On 26 July 2012 the Minimum Wage Amendment Bill was introduced. This Bill seeks to amend the Minimum Wage Act 1983 and prescribe a minimum rate of not less than $15.00 per hour by April 2013. Although with National already strongly opposing raising the minimum wage it is unlikely that this bill will be successful.
NOTABLE CASE LAW:
Idea Services Ltd v Dickson
Idea Services Ltd v Dickson [2009] ERNZ 116 (EmpC) triggered the enactment of the Sleepover Wages (Settlement) Act 2011. Mr Dickson was employed by Idea Services Limited (“ISL”) for shift work as a community service worker. Several nights a month he performed sleepovers for which he was paid well below minimum wage, at a rate between $3.40 and $4.30 per hour.
The Employment Relations Authority held that sleepovers amounted to work under the Minimum Wage Act and therefore payment must be at least minimum wage for each and every hour worked. On appeal the Employment Court upheld this finding and considered that the constraints on Mr Dickson, such as Mr Dickson’s inability to carry out normal family life or socialise with friends, meant that the sleepovers amounted to work.
As a result of Dickson, employees are recognised as being entitled to not less than the prescribed minimum rate, as per the Minimum Wage Act, for each and every hour worked. Under the Holidays Act 2003, employers are required to keep holiday and leave records, which overlaps with the requirement under the Employment Relations Act 2000, to keep accurate time, wage and leave records, that should record the hours worked including any sleepovers. Failure to do so can result on the employer being liable for a penalty of up to $20,000.00 for each breach. The Dickson case is a timely reminder of the importance to keep accurate records to enable employers to account for the hours their employees work and get paid for.
Foai v Air New Zealand Limited
The recent case of Foai v Air New Zealand Limited [2012] NZEmpC 57 (“Foai”) demonstrates the importance for employers and their payroll staff to accurately pay employees and address any discrepancies with payslips as soon as they arise. In Foai, Air New Zealand (“ANZ”) overpaid Mr Foai a total of $70,428.04 and sought to recover the net amount of $42,435.40. Mr Foai was dismissed on the basis that there had been a fundamental breakdown in the trust and confidence between the parties, with ANZ advancing that one of the reasons was that Mr Foai was not proactive enough in querying his overpayment.
The Employment Relations Authority ruled in ANZ’s favour. Mr Foai challenged the determination in the Employment Court. Mr Foai argued that, while he did not dispute the overpayment, he received the wage payments in good faith and had altered his position in reliance on the validity of the wages he was paid. Mr Foai invoked the equitable defence of change of position and the statutory defence of alteration of position under section 94B of the Judicature Act 1908, to support his claim that ANZ should not be able to recover the overpayment.
Mr Foai had begun working for ANZ on a casual basis and then gained permanent part-time employment with the Company. Mr Foai was promoted to a new position that was described as a ‘temporary Full-time Time and Attendance Administrator’. While Mr Foai knew he would be receiving “average earnings”, described to him as a “top up” of his ordinary hourly rate, the Court was satisfied that Mr Foai did not know what this would have amounted to in dollars and cents. Payslips produced to the Court showed 40 incorrect payments across various pay periods. The Court accepted that Mr Foai did raise queries about his pay with ANZ’s payroll team.
ANZ argued it had a right to restitution because the money had been paid by mistake. The Court rejected this argument as ANZ failed to identify in its evidence any actual mistake which led to the overpayments. The Court considered that Mr Foai had not acted dishonestly or in bad faith, but rather “naively” had rationalised the increased payments by believing they were as a result of his connections with senior management.
The Court accepted that Mr Foai had changed his position in a number of ways, including moving into his own accommodation, getting married, incurring a child support debt and traveling overseas. The Court held that Mr Foai was entitled to rely on ANZ to “get the figures right” and not “misrepresent the amount of pay to which he was entitled.” The Court held that it would be inequitable to require repayment. ANZ appealed the decision to the Court of Appeal, who dismissed ANZ’s claim.
IMPACT ON PAYROLL
It is important for employers and those administering payroll to know their obligations around paying staff to avoid liability for getting it wrong. We recommend ensuring that time, wage and leave records, employment agreements and workplace policies are up-to-date and reflect any law changes. Any requests for leave should be recorded in writing to keep track of them, to ensure staff entitlements are correct and to avoid the risk of to paying holiday entitlements twice for failing to have requests in writing. When in doubt, employers and those administering payroll should seek legal advice to avoid the penalties that can be faced for non-compliance.
Disclaimer
This article is produced to provide a brief summary of issues that have developed in the area of employment law. While we take time to ensure the information is correct, details may be omitted which may be directly relevant to a particular reader. The information should not therefore be taken to be sufficient for making decisions. If you have any questions in relation to anything discussed in this article or just a general query, contact the writer or team at Copeland Ashcroft Law who will be happy to assist you.
First published in Pay and You (PAY) – Issue 1, December 2012
http://www.nzppa.co.nz/magazine/01/