New Zealand: Latest Legal Developments And Legislative Changes In Workplace Relations And Employment

The NZ Employment Bulletin is designed to keep you up to date and informed on the latest legal developments and legislative changes in workplace relations and employment.

EMPLOYEE PROTECTION PROVISIONS AND REDUNDANCY

The recession is continuing to impact on the world of commerce. Many employers are now faced with sale of the whole or part of their business as well as redundancies. Below is a quick reminder of employers' responsibilities to employees during those processes.

Sale Of Some Or All Of Your Business

The Employment Relations Act requires employers to ensure that all collective and individual employment agreements contain employee protection provisions.

An employee protection provision is designed to provide protection for the employment of employees affected by restructuring (defined as contracting out or selling or transferring the employer's business, or any part of it, to another person). It must include:

  • The process that the employer is to follow in negotiating with the purchaser of the business (who will be the new employer) about restructuring, to the extent that it relates to affected employees.
  • The matters relating to the affected employees' employment that the employer will negotiate with the new employer, including whether the affected employees will transfer to the new employer on the same terms and conditions of employment as they are currently employed under.
  • The process to be followed at the time of restructuring to determine what entitlements, if any, are available for employees who do not transfer to the new employer.

Where an employee's existing employment agreement has such a clause, ensure you comply with it.

Be aware that in the event the existing employment agreements do not contain such a clause, employees could bring injunction proceedings preventing the restructure. If your employees' employment agreements do not contain such a clause, we can assist in updating them. All employment agreements must comply with this legislation in the event restructuring occurs.

It is also vital to assess each employee individually, particularly as there are further responsibilities for the special group of employees deemed to be 'vulnerable employees', which may include some or all of your employees.

Redundancy

Redundancies are, generally speaking, highly stressful for all involved.

Employers downsize and restructure their business to save money, so the last thing you need is a successful claim against the business because a fair process has not been followed.

With that in mind, we set out the mandatory requirements for a fair process:

  • Remember to comply with your good faith obligations under the Employment Relations Act. This includes being responsive and communicative, and providing employees access to information and an opportunity to comment where there is a proposal to make a decision that will or is likely to have an adverse effect on the continuation of their employment.
  • Decide on a clear process before any action is taken. This will vary depending on the circumstances. Feeling your way through a redundancy does not provide a clear path for you as an employer or for the employees affected.
  • Where a number of employees are applying for the same position, advise them of the criteria against which they are to be measured and ultimately selected.
  • Consider re-deployment where possible.
  • It is vital to keep a clear paper trail. Reduce all notifications and discussions to writing.
  • Comply with all relevant provisions of the employee's employment agreement.
  • Provide employees with an opportunity to respond to any proposal before making a final decision.

You should note that while the Courts recognise employers need to be able to make their business more efficient, you still need to show that there is a genuine commercial reason for the decision to make employees' positions redundant.

The points raised here are a 'once over lightly'. Often matters will arise in both the sale of a business or a redundancy situation that are specific to employees or your business. We are able to provide specific advice in relation to such matters where required.

THE NINE DAY FORTNIGHT

One of the more publicised concepts to come out of last month's job summit is the nine day working fortnight. The basic idea behind the scheme is to allow employees to take an unpaid day off every fortnight rather than have their employer resort to making them redundant.

Where employers choose to offer the scheme they must gain consent of each worker. Each employee is able to reduce their work for one day per fortnight day by up to ten hours. The scheme can be used by employers for up to six months over an 18 month period, giving the company time to restructure its operation and workforce or for sales to pick up. Employees who choose to take up the offer will be immune from redundancy for that period. There would be no extension to the six month period.

The Government will subsidise employees $12.50 an hour for up to five hours (that is $62.50 per day) for the unpaid day. Employers can choose to supplement this.

The government is hopeful that up to 25,000 workers could save their jobs under the scheme. While, Prime Minister John Key has recently expressed his disappointment at the lack of interest from large employers so far, it has been reported that some Fisher and Paykel workers have signed up to the scheme and Work and Income is reporting interest from a number of other companies.

One criticism of the concept is that it is too optimistic because it requires both employers and employees to consent to it. Indeed, the ultimate question is whether employers will choose to limit their redundancy options in a climate where even the near future is quite uncertain. If you are considering the nine day fortnight as a viable alternative for your business, we can provide assistance specific to your needs.

REMINDER: CHANGES AS OF 1 APRIL 2009

From 1 April 2009, changes to the Government's Kiwisaver scheme and rules surrounding breaks and infant feeding will come into force.

In regard to the Kiwisaver scheme, the minimum employee contribution will reduce to 2% of gross annual pay. The minimum employer contribution will increase to 2% but will not increase any further as was previously required. The Government will no longer contribute $40 per year to employees' Kiwisaver accounts to subsidize scheme provider fees.

Any voluntary employer contributions you receive will be liable for employer superannuation contribution tax (ESCT). 1 April also sees the introduction of the breaks and infant feeding legislation. On its face, the legislation may be difficult to satisfy in certain industries. Please contact us if you wish to discuss workable solutions to this or simply wish to update your employment agreements and educate staff on their entitlements.

Phillips Fox has changed its name to DLA Phillips Fox because the firm entered into an exclusive alliance with DLA Piper, one of the largest legal services organisations in the world. We will retain our offices in every major commercial centre in Australia and New Zealand, with no operational change to your relationship with the firm. DLA Phillips Fox can now take your business one step further − by connecting you to a global network of legal experience, talent and knowledge.

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.

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