Co-authored by Rosemary Wooders and Charlotte Joy of Bell Gully
In October 2017, the Labour Party (led by Prime Minister Jacinda Ardern) was sworn into Parliament as New Zealand’s new government. As this is the first change in government (previously a National Party Government) in the last nine years, significant changes to employment law are expected.
Two key changes have already been confirmed:
- The minimum wage entitlement will increase from NZD$15.75 (USD 11.37: GBP 8.27: EUR 9.32) to NZD$16.50 (USD 11.91: GBP 8.66: EUR 9.76) on April 1, 2018, and will increase to NZD$20 (USD 14.44: GBP 10.50: EUR 11.83) by 2021.
- Paid parental leave entitlements will increase from 18 to 22 weeks on July 1, 2018, and will increase to 26 weeks by 2020.
Key Proposed Changes
90-Day Trial Period
Currently, an employer has the ability to dismiss a new employee within the first 90 days of employment without any recourse from the employee for unjustified dismissal. In addition, the employer does not have to provide reasons for such dismissal.
The Labour Government intends to amend this regime by requiring employers to provide reasons for an employee’s dismissal and by introducing a free “referee service” through which former employees can challenge a dismissal. Both parties can be represented at the informal “referee service” but lawyers will not be permitted. Pursuant to this proposal, the parties would not have any avenue to appeal a referee’s decision to the courts.
Fair Pay Agreements
The Labour Government has committed to introducing Fair Pay Agreements (FPA). FPAs are akin to collective agreements negotiated between employers and unions in a particular industry with the assistance of the Employment Relations Authority. It is anticipated that the FPA will apply to all employers in the industry, even those that did not take place in the negotiations.
Collective Bargaining Strengthened
Proposals have also been made to strengthen the role of unions in collective bargaining. Some key proposed changes include restoring unions’ right to initiate bargaining in advance of employers, restoring the obligation on parties who are in bargaining to reach an agreement (unless there is a genuine reason not to), and removing the ability for employers to deduct pay from workers taking partial strike action.
At present, if a business has 19 employees or less, it is not bound by the same onerous redundancy consultation obligations as larger businesses. This exception was aimed at assisting the viability of smaller businesses. The Labour Government has proposed removing this exception so that all businesses will have the same consultation obligations.
If reinstatement is ordered in an unjustified dismissal claim, the employer must treat the employee in all respects as if they have never been dismissed. Reinstatement used to be the primary remedy in New Zealand until the national government reversed this. It is proposed that reinstatement will become the primary remedy once again. Currently, greater focus is on compensation awarded to the employee as opposed to reinstatement.
Additional Employee Protections
A number of proposed policies aim to further protect employees. Examples include providing employees with a right to statutory redundancy compensation and reintroducing regulated rest and meal breaks. Of particular interest to foreign companies is the proposal of making New Zealand employment standards applicable to everyone working in New Zealand, including foreign workers working for foreign companies, regardless of any foreign choice of law clauses in their employment agreements.
At this stage, we can only surmise as to how the new employment law proposals will develop. However, it is apparent that the proposed reforms will inevitably strengthen the rights of employees and unions. Whilst unions see the change as important progress to improve worker rights, some business groups fear that the changes will encourage employers to act more conservatively when hiring new employees and will increase the cost of doing business in New Zealand.
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