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Changing Tides: Impact to NZ Employment Law Post-Election

October 18th, 2023 - Matt Belesky


Anticipated Changes to Employment Law from the New Zealand Election:

With National as the clear front-runner following the weekend’s election results, it is timely to consider what changes to employment law are likely to occur over the next term. We also examine in this article what changes we may see because of Act, and possibly NZ First’s, influence in a coalition government.

The Political Football Continues

From the outset one must acknowledge the ‘political football’ that has historical taken place in the relation to our labour laws. There has most clearly been a discernible pattern of our labour laws generally favouring the left (employees/worker rights) or right (employers) depending on whether Labour or National is in power. For example, union rights, influence and powers have historically been extended under Labour while under National they have been reduced or peeled back.

Restoration of 90-Day Trial Periods for Larger Employers

Another apt example of the political football is that of see-swinging that has occurred regarding 90-day trial periods. National introduced 90-day periods initially by testing the scheme in certain industries in 2009, and subsequently extending it nationally in 2011. When Labour came into power in 2017 it limited the use of 90-day trial to small businesses (those with 19 or fewer employees). National has confirmed it will “bring back 90-day trials” by removing the small-employer limitation.

Practically speaking the change back to 90-day trials period being usable by all employers is unlikely to make huge ripples in employment law. The law in relation to the use of 90-day trial periods is well-settled, and we will simply be reverting to what the situation was between 2011-2017. We should see their use heightened, and a flow-on effect of that being an increase to the number of proceedings instigated in the Employment Relations Authority involving challenges to 90-day trial period dismissals. As 90-day trial periods undermine an employee’s job security within their first few months of employment, it may well result in more job-market movement and slightly higher levels of unemployment, at least in the interim until the market resettles.

If you represent or work for an employer that wishes to include a 90-day trial period in your employment agreement, contact Buckettlaw today. There are relatively few, but also vitally important, requirements applying to the use of a 90-day trial period however, if those requirements are not strictly met the trial period provision may be rendered invalid, and therefore any subsequent dismissal based on that 90-day trial provision is likely to be determined to be unlawful. It is therefore imperative that all employers consult with a qualified professional, such as an employment lawyer, before incorporating a 90-day trial period in their employment agreement. An unjustified dismissal finding has the potential to cost employers tens of thousands of dollars, often in circumstances where an unlawful dismissal could have been easily avoided.

Fair Payment Agreement Act Scrapped

The next big change we are likely to see (and to see National push through quickly) is a repeal of the Fair Pay Agreement Act 2022. We are likely to see this change occur very soon noting it is within National’s ‘100 Day Action Plan” and appears to be supported by Act.

The Fair Pay Agreement system, introduced recently under Labour, was aimed at establishing a process for workers to bargain for minimum employment standards that would cover all employees in an industry or occupation. Essentially, a Fair Pay Agreement is a collective agreement that would establish in a specific industry or occupation minimum employment standards that would be binding on all employers operating in that industry or occupation. Although Fair Pay Agreements do have a focus on pay, they also can include others matters such as leave entitlements, training and development, health and safety requirements, flexible working, and redundancy entitlements to name a few.

New Zealand’s new Fair Pay Agreement system, which was based on Australia’s Modern Awards system, has been slow to get off the ground and has been met with its fair share of controversy, particularly because the evidence from Australia suggests many SMEs will end up bearing the brunt of the increased compliance costs and it will take some time for Fair Pay Agreements to be put in place. As National does not appear to be introducing any alternative, it appears these considerations are all academic as the Fair Pay Agreement scheme will be thrown into the mounting ‘tax-payer-money-spent for-nothing’ bin.

If the past is anything to go off, we may also see a National-Act coalition reduce union-rights and collective bargaining rights, and a repeal of the mandatory requirement on employers to provide rest and meal breaks (instead providing a more flexible regime) however, those changes seem be less of a priority at the current point in time.

Change to Parental Leave

On their website, National continues to state they will modernise paid parental leave rules by providing more flexibility. National propose to do so by allowing parents to take their parental leave entitlements at the same time, and more generally to divvy up parental leave entitlements between parents as they see fit. Noting that Nicola Willis’ members’ Bill on this front failed recently, National appear to be set to introduce this change as a Government Bill noting National states on its website, “the next National Government will make it happen”.

The Act Party

Both National and Act’s respective policies include removing the small-employer limit to 90-day trial periods and scrapping the Fair Pay Agreement scheme. It is therefore anticipated these changes are likely to proceed first, and relatively soon, under a National-Act coalition government.

One of Act’s policies is to remove the eligibility for remedies in personal cases however in the writer’s opinion National is unlikely to see the benefit in this policy noting that the existing system already provides the judiciary with discretion to reduce any remedy awarded (including to nothing). Removing this discretion, which appears to be what Act is suggesting, does however present a considerable change as would practically discourage many employees taking a case.

Practically speaking we see plenty of awards for levels of contribution between 10-30%. These litigants can still end up financially better off (or at least not significantly financially worse-off) from taking proceedings, however this is unlikely to be the case for this category of litigants if this policy were to proceed.

Act have provided a few other policies that may be impractical to implement. Take for instance Act’s proposal that Employment Relations Authority determinations would need to be delivered within a month of the investigation meeting. The Authority is already supposed to issue a determination within three months however practically it often exceeds that timeframe. There are a number of reasons for this (resourcing, nature of the proceeding, personal matters for example) that in the writer’s opinion would render the Act’s proposal nugatory unless contemporaneously addressed.

Act is proposing that an Authority Member can be dismissed if they do not meet the requirement to deliver determinations within a month of the investigation meeting. In the writer’s opinion, that would likely have a positive flow-on effect to the timeframes within which determinations were released, but equally it will likely result in determinations being drafted in haste, and risks determinations being reached that are not robust. It is important in this regard to acknowledge that often by the time the parties have got to the stage of awaiting a determination, they have spent tens of thousands of dollars in legal costs.

There is possibly merit in Act’s view that Authority Members should be performance managed (at present they cannot be). There exists a risk that, just like any other job, an Authority Member may become complacent in their role, or may simply not be up to the job. To some degree it makes sense that the Chief Authority Member should have the ability to performance manage Authority Members however whether that is practically feasible will depend on a range of different factors.

Removing the ability for the Employment Relations Authority to award reinstatement as a remedy, another of Act’s policies, would represent a drastic change to New Zealand’s employment law framework. If the policy were to proceed, it may, in the words of the Late Chief Judge Goddard, “create a system for licensing unjustifiable dismissal” because it may result in compensation being routinely awarded for unjustified dismissal.

That may mean that practically some employers consciously choose to dismiss without just cause simply because they can ‘pay to get rid of’ an employee for a certain price, rather than having just cause to do so and following a procedurally fair process. It may result in employer’s choosing to do the ‘wrong thing’ and pay for it, simply because it is easier and more convenient, rather than doing the harder, less convenient, ‘right’ or ‘lawful’ thing.

In the writer’s opinion, this would represent a backwards step in the jurisprudence in our employment law, noting the Employment Court has recognised in Humphrey v Canterbury District Health Board that, “Jobs are important, and money is often a poor substitute”. This is especially the case for certain types of employees, such as Police Officers, because if they are unjustifiably dismissed then practically that would end their career as a Police Officer. This is because they practically have no other employer they can work for in New Zealand as a Police Officer. In the writer’s opinion, this would result in significant injustices, including for those types of workers that we desperately need more of. At this stage, it is unclear whether National will entertain such a significant change as part of coalition negotiations, but time will tell and watch this space.

Other employment-related policies on Act’s website including removing 2 January as a public holiday to “help small business absorb the cost of matariki”, removing a contractor’s ability to challenge their status (by claiming the real nature of the relationship is one of employment) if certain conditions are met, to introduce an hour-based accrual system for annual leave, and to place a moratorium on minimum wage increases for three years.

New Zealand First Party

NZ First do not seem to have much in the way of employment-related policies representing any significant or material change to existing arrangements, although they are in favour or removing the limit to the use of 90-day trial periods and have said they want to reinstate workers who lost their jobs due to the covid-19 mandates. It is unclear how reinstatement would be practically feasible in circumstances where the category of workers in question have either been out of employment for a considerable period, or have instead established new employment relationships with different employers. Similarly, certain workers may face difficulty with re-integration in circumstances where they have been unable to practice and therefore no longer comply with professional practice requirements.

One of NZ First’s policies is to examine the feasibility of lifting the minimum wage to at least $25 an hour, with a corresponding tax concession for businesses to do so, although that doesn’t seem too likely to proceed considering Act is advocating for a minimum wage increase freeze.

Other Changes

The other major change the public should brace themselves for is a significant reduction in the government workforce. This does seem to be a focus for both National and Act, although National to a lesser degree. No doubt the degree to what the public service is reduced will be a matter of coalition negotiations, and the New Zealand public will receive greater clarity over the coming months. Brace yourself for a wave of public sector redundancies taking place in 2024 however as they are coming.

Many public sector employees will remain on tenterhooks in the interim, noting some may be facing a very tough festive end-of-year period. The government however can be expected not to rush through any changes, and to demonstrate some degree of empathy to the fact that facing loss of employment via redundancy in December-February is particularly tough because the labour market tends to cool off over that holiday period.

More generally the change to a National-Act, and possible NZ First, coalition – will result in policies coming through that are more in favour of employers and business, as opposed to favouring worker rights and minimising the inherent inequality of power that ordinarily exists in employment relationships.

Note: BuckettLaw takes no responsibility for the consequences of any actions taken on the basis of our articles. Any views expressed or comments made in an article are the writers option only. The content in our articles does not constitute legal advice. If you need legal or expert advice you should obtain specific advice about your case or matter from a professional. For legal advice based on your individual situation please contact us to speak with one of our expert lawyers.

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Matt Belesky

Matt Belesky is an experienced employment lawyer providing practical and commercially focused advice. He has expertise in various areas of employment law, including disciplinary and performance issues, workplace investigations, and health and safety. Matt represents clients in mediation and court proceedings. In his free time, he enjoys exercise, film, music, and spending time with friends.

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