New Zealand: The Employment Standards Legislation Bill

The Employment Standards Legislation Bill will see some sweeping changes made to our employment laws, due to come into effect from 1 April 2016.

The Bill makes several amendments to key pieces of employment legislation with the aim of "(promoting) fairer and more productive workplaces by providing enhanced protections and benefits for both employers and employees". The most significant changes are summarised here.

Changes to parental leave
The Bill will make amendments to the Parental Leave and Employment Protection Act 1987 including:

  • The eligibility of parental leave will be extended to employees with non-standard working arrangements and employees who assume permanent primary responsibility for the care, development and upbringing of a child under the age of 6.
  • Extended leave of 26 weeks will be available to employees who have been employed by the same employer for 6 months (instead of 12 months currently).
  • "Keeping in touch days" will introduce some flexibility by allowing an employee to work for up to 40 paid hours while on parental leave, by agreement.
  • Paid parental leave will be increased from 16 weeks to 18 weeks.
  • When a baby is born prematurely, a primary carer will be entitled to additional parental leave entitlements for each week that the baby was born preterm (up to a maximum of 13 weeks). That entitlement will end at the expected due date.
  • Fines will be increased from $5,000 to $15,000 for employers who mislead or attempt to mislead the Ministry of Business, Innovation and Employment in relation to paid parental leave.

Zero hour contracts
The concept of "zero hour contracts" (an arrangement where an employer does not commit to a minimum number of hours but an employee is required to be available for work) attracted criticism last year. Parliament has responded with the following amendments to our employment laws:

  • Employers will be required to ensure that an employee's agreed hours of work are included in the employment agreement.
  • Employers will be prohibited from requiring an employee to be available for work over and above their contracted hours unless the employment agreement provides compensation for that availability requirement.
  • A provision requiring an employee to be available for work will only be enforceable if there are genuine and reasonable grounds for that requirement and "reasonable" compensation is paid for that availability.
  • If there is no availability provision in an employee's employment agreement providing for reasonable compensation, an employee will be able to refuse to perform additional work.

Unfair employment practices
Other changes to the Employment Relations Act will be made to address unfair employment practices. These are:

  • Where an employee does shift work, the employment agreement must specify the notice period required if the employer proposes to cancel a shift, along with the compensation payable to the employee if that provision is not complied with. The level of compensation will have to be "reasonable".
  • An employer will not be able to prohibit an employee from having a second job. There is an exception where the employer has reasonable and genuine grounds and that reason must be set out in the employment agreement.

The Bill will also make changes to the Wages Protection Act 1983 to prohibit an employer from making "unreasonable deductions" from wages. This is designed to address the sort of situation highlighted last year where some petrol stations were deducting money from employees' wages when a customer failed to pay for fuel.

Enforcement of employment standards
The Bill recognises that some employers still fail to meet minimum employment standards and seeks to increase compliance by:

  • Requiring employers to keep records in sufficient detail to demonstrate that they are complying with the minimum entitlement provisions.
  • Creating a new sanctions regime for serious breaches of those standards, including the introduction of non-insurable pecuniary penalties for breaches of the minimum entitlement provisions. The penalties are hefty; up to $50,000 for an individual, and for a body corporate, the greater of $100,000 or 3 times the amount of the financial gain arising from the breach.
  • Increasing the powers available to labour inspectors and widening the range of orders they can apply for.
  • Allowing employees to bring an action against an employer who fails to comply with the specified form and content of an Individual Employment Agreement.

Making new orders available to the court. A banning order can prohibit a person from entering into an employment agreement, from being an "officer" of an employer, or being involved in the hiring of employees. A compensation order can require a person to make a payment to an aggrieved employee for the loss or damage suffered by the breach of their minimum entitlements.

Casual employees
The Bill will make some amendments to the Holidays Act 2003 which will impact on the employment of casual employees. The effect will be that employers will have to pay all casual employees a loading of 19% on the average hourly rate of a full-time employee doing the same or similar job as the casual worker. The 19% will be broken down as follows:

  • 1.6% loading for sick and bereavement leave;
  • 4.4% loading for statutory holidays;
  • 8% loading for standard holiday pay; and
  • 5% casual loading.

The intention is that by introducing extra loading payments this will encourage employers to move employees off casual contracts, and on to part-time or full-time contracts.

The Bill is expected to come into force on 1 April 2016 so employers will need to ensure they are compliant with these requirements in anticipation of these changes.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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