New Zealand: NZ Employment Bulletin: Proposed Amendments to the Provisions for Protection of ‘vulnerable Workers’ in Restructuring Situations – Loophole Closed

Last Updated: 30 March 2006
Article by Rick Hargreaves and Rani Amaranathan

The Employment Relations Amendment Act (N.Z) 2004 introduced the right of ‘vulnerable workers’ to transfer to the new employer in restructuring situations. But last year the Employment Court in Gibbs and others v Crest Cleaning Ltd highlighted a loophole that meant vulnerable workers were denied transfer rights in ‘subsequent contracting’ situations. The Government has now introduced a Bill to close this loophole.

The current situation

At present, specified categories of employees (vulnerable workers) (mainly cleaning and catering staff) are given special protection in the Employment Relations Act 2000 (ERA) in a restructure situation. Basically, if an employer restructures a business that engages vulnerable workers, those workers have the right to transfer on their existing terms and conditions of employment to the new employer if the restructuring results in their redundancy. It was generally thought that this definition would include situations where a principal ends a contract with one supplier and awards it instead to a new supplier (second generation contracting). But this was held not to be the case. In the Gibbs case, a Kindergarten Association decided not renew a cleaning contract with one of its suppliers and awarded it to a new supplier. Employees of the previous supplier fell within the specified categories of vulnerable workers. But the situation was held not to fall within the ERA definition of restructuring because the original employer’s business was not being undertaken for it by another person. Instead, it was being undertaken for the Kindergarten Association by another person. The Court also questioned whether the protection would apply if the new contractor did not have employees (in that case the services were to be undertaken by franchisees).

Employment Relations Amendment Bill 2006

The Bill is specifically designed to close the loopholes in Part 6A of the ERA that the Employment Court highlighted in Crest.

The key proposed changes for vulnerable workers are:

  • The definition of ‘restructuring’ would be changed to explicitly include contracting out, contracting in, succession to contract and subsequent contracting. Each ‘restructuring’ situation would be defined.
  • The right to transfer would apply whatever the reason for the first contract ending and even if the first contract ends before the next contract is awarded.
  • The right to transfer would apply even if the new contract holder does not intend to have employees perform the services.
  • Workers with fixed term employment agreements would transfer on a permanent basis if the new work was permanent or on a fixed term basis for the same term as the term of the new supplier’s contract.
  • Workers could become employed by two employers if only part of their work is to be performed by a new employer, or if performance of their work is to be divided between more than one new employer.
  • Non complying employers/contractors could incur a penalty under the ERA.
  • Transferred employment is treated as continuous for the purposes of statutory entitlements (e.g. Holidays Act 2003, Parental Leave and Employment Protection Act 1987).

Fixed term agreements

The Bill also closes the loophole relating to fixed term vulnerable employees whose employment under their fixed term ends when the independent contractor/subcontractor is no longer contracted by the principal. This type of fixed term employee has the same rights of transfer as permanent vulnerable employees. So linking the reason for and ending of a fixed term agreement to the expiry date of a supply contract could be ineffective.

Employer compliance

The new compliance requirements relate to an employer having to give vulnerable employees notice of their right to make an election to transfer. These include: providing a reasonable opportunity to exercise that right; the date by which that right must be exercised; and providing information sufficient for the employee to make an informed decision about whether to exercise the right to transfer.

That information must include: the name of the new employer; the nature and scope of the restructuring; the date on which the restructuring is to take effect; how to make an election; the person to whom the election is to be sent; and the form in which the election is to be sent.

Who might the changes affect?

There are an elaborate set of examples in the Bill that set out what may qualify as a transfer situation. Companies who are not ‘employers’ may be caught by the proposed changes, even if they were intending to employ a subcontractor, franchisee or other type of worker to perform the contract.

The changes will be significant for tendering and contracting situations affecting vulnerable workers. If the affected employees will be surplus to the new contractor’s needs, the cost of redundancies may need to be built into the tender price. This would make the contracts more expensive for persons awarding contracts to new suppliers and for suppliers tendering for new contracts. It would give the existing contractor a price advantage.


In summary the new Bill closes the door on the loopholes exposed by the Gibbs case and fixed term employment agreements and adds the penalty regime in the ERA to the vulnerable employee provisions. There are some added compliance requirements for both the current employer of a vulnerable employee and any independent contractor/subcontractor who works for a principal. The added compliance mostly relates to the information that employers have to provide to vulnerable employees before a restructure so that they may elect whether to exercise their right to transfer or not.

This publication is intended as a first point of reference and should not be relied on as a substitute for professional advice. Specialist legal advice should always be sought in relation to any particular circumstances and no liability will be accepted for any losses incurred by those relying solely on this publication.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions