New Zealand: The changing landscape of employment law

Changes of government often see significant shifts in the employment law landscape in New Zealand and the election of the Labour led government in late 2017 was no exception.

To this end the Employment Relations Amendment Bill (the Amendment Bill) was introduced into Parliament in January 2018 and is currently at the select committee stage.

This column touches on some of the key changes likely to affect businesses under the Amendment Bill, as well as recently confirmed changes to minimum employment standards.

90 day trial periods

One of the major changes signalled by the Amendment Bill is a roll back of 90 day trial periods.

A 90 day trial period provides an employer with the ability to dismiss an employee within the first 90 days of their employment without providing a reason for the dismissal, provided that the trial period provision is correctly drafted and implemented.

An employee who is dismissed under a 90 day trial period cannot raise a personal grievance in respect of the termination of their employment unless they believe the dismissal is discriminatory. Under the current legislation, any employer, regardless of size, is able to include a 90 day trial provision in their employment agreement for new employees. The Amendment Bill, however, will reduce the application of 90 day trial periods to businesses with less than 20 staff.

Meal breaks

Under the previous government, prescriptive rest and meal breaks were removed and instead the legislation was amended to provide for reasonable meal breaks. In practice, this means that parties have the ability to agree on what reasonable rest and meal breaks during a shift may be, without the need to refer back to defined minimum standards at law.

The Amendment Bill will revert back to the previous position and provide for set periods of breaks after the employee has worked a certain number of hours. The Amendment Bill provides that, if an employee works a shift of between 2 and 4 hours, they will be entitled to a 10 minute paid rest break during their shift.

If they work a shift of between 4 and 6 hours, they will be entitled to a 10 minute paid rest break and a 30 minute unpaid meal break. For shifts between 6 and 8 hours employees will be entitled to two 10 minute paid rest breaks, and a 30 minute unpaid meal break.

For periods of work over and above 8 hours, the above formulae will effectively repeat with further rest and meal breaks necessary.

Restoring reinstatement

Another major change under the Amendment Bill is the restoration of reinstatement as the primary remedy for employees in cases of unjustified dismissal.

When an employee raises a personal grievance for an unjustified dismissal, there are a number of remedies that they are able to pursue under the Employment Relations Act, including loss of any remuneration as a result of the dismissal, compensation for injury to feelings, and reinstatement to their former role (or a similar role). As it stands, reinstatement is just one of the remedies available and is given no priority by the Employment Relations Authority (ERA) or Court over other remedies.

By contrast, the Amendment Bill, provides that the Authority or Court must order reinstatement wherever practicable, irrespective of whether other remedies are ordered, a significant shift from the current position. This change in emphasis may well affect private settlements struck between employers and employees, pushing up monetary settlements where the employer seeks to avoid the risk of reinstatement being ordered by the ERA.

Minimum wage

In addition to the changes under the Amendment Bill, the government has committed to increasing the minimum wage throughout its term.

The first such increase took effect from 1 April 2018 which saw the minimum wage for adult workers increase to $16.50 per hour (with minimum training rates and starting out rates also increasing).

The ultimate intent of the current government is to increase the adult minimum wage to $20.00 per hour by 2020.

Paid parental leave

Parental leave is a scheme that provides eligible working parents or primary careers to take paid leave in order to take care of their new born baby or a child under the age of 6 who is now being cared for by them. From 1 July 2018, parental leave will increase from the current 18 weeks to 22 weeks. By 2020, parental leave will increase to 26 weeks. Businesses should therefore plan for the extended period of leave and make sure there are adequate resources available to cover absences due to parental leave.

More to come

While this column touches on some of the key changes in the Amendment Bill, the government has signalled a clear intent to continue reviewing and where it considers it necessary, amending the employment law landscape in New Zealand. We suggest you implement strategies now to prepare for the changes and take legal advice if you're unsure about how to tackle the new legislation.

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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