Court guidance on new Hours of Work law coming

General / 25 March 2017
Court guidance on new Hours of Work law coming

The first Employment Relations Authority (Authority) determination on the new hours of work legislation, introduced in April 2016, has been released and has escalated the matter to the Employment Court for decision.

Applications were lodged by two workers (Ms Doran and Mr Fraser) employed in two different McDonalds restaurants. Both employees sought to resolve concerns relating to availability provisions in their individual employment agreements (IEAs), and the requirements of section 67D of the Employment Relations Act 2000 (Act), which was introduced to regulate against so-called “zero hour contracts”.

The new law: availability provisions
Where an employee’s performance of work is conditional on the employer making work available to the employee, and the employee is required to be available to accept any work that the employer makes available, the Act provides that the relevant IEA (or collective agreement) must include an “availability provision”.

Per s67D, an availability provision can only be used where the employer has genuine reasons based on reasonable grounds for including it, in which case the IEA must specify the agreed hours of work. Perhaps most controversially, employers must now also pay “reasonable compensation” to employees for this availability.  No definition of reasonable compensation is provided in the Act, but factors listed as considerations in determining whether compensation is reasonable include the number of hours the employee is required to be available, the proportion of these compared to the number of agreed hours, any restrictions that the employee suffers as a result of the requirement to be available, and their rate of pay.  Notably, there is a “loophole” for salaried employees, whereby the parties can agree the employee’s remuneration includes compensation for the employee’s availability (provided minimum wage requirements are met).  The periods the employee is required to be available must also be specified in the IEA.

Employees’ claims
Here, the employees claimed that their IEAs, entered into in August 2016, included a term identifying the employees’ “agreed availability” but did not specify what compensation was payable in return for such availability.  Both employees claimed unjustified disadvantage and sought orders requiring their employers to comply with the Act, and to reimburse them a sum equal to an availability allowance of $5 for every hour of availability.

What this means for you
The Employment Court decision will likely shed some much needed light on the new changes, in particular what amounts to “reasonable compensation.”  The Authority commented in its determination that “The Court’s interpretation of this newly enacted provision could assist not only the parties but also guide employers, workers and their unions generally in daily workplace arrangements and in bargaining on terms and conditions.”

It is clear that many clauses such as “The employee is required to work all additional hours”  or   “The hours of work will depend on the availability of work and our business demands” which were common before the law changes  are unlikely to adhere to the current legislative requirements and need to be updated.

If you’re unsure how to manage your obligations regarding availability, please contact us.  We would also like to remind you that on 1 April 2017 all existing employment agreements must reflect the new legislation. You can read more about the others changes here:

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 legal advice from your lawyer for any questions specific to your workplace.
March 2017

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