Increased Sick Leave Entitlements
From 24 July 2021 paid sick leave entitlements for all qualifying employees increased from five to ten days per year. All part-time and full-time employees qualify for sick leave after six months continuous employment with the same employer. Sick leave will still accumulate up to a maximum entitlement of 20 days, and is not required to be paid out upon termination.
Paid Bereavement Leave Now Available for Miscarriage or Still Birth
From 31 March 2021 all employees who qualify for paid bereavement leave can now take it in the event of the end of a pregnancy by way of a miscarriage in the first 20 weeks of pregnancy, or a still-birth. An employee whose pregnancy ends with a miscarriage or still-birth can take the leave, or the person’s spouse or partner, or former spouse or partner if they would have been the biological parent of the child born.
Fair Pay Agreements on the Way
In May 2021 approval was provided by the government to commence drafting of new Fair Pay Agreement (FPA) legislation. FPAs are achieved by collective bargaining between employees and employers in a particular industry or occupation. Once agreed, a FPA would set the minimum terms and conditions of employment across an industry or sector. All employers in that industry or sector would need to provide terms and conditions that are no less favourable than those contained in the relevant FPA.
It is currently proposed that bargaining for a new FPA would need to be initiated by a Union applying to the Ministry of Business, Innovation and Employment. The Union would first need to demonstrate that 10% or 1,000 employees (whichever is lower) in a particular industry or sector support the initiation of bargaining for a FPA, or that there is public interest in bargaining being initiated because of certain conditions existing within the industry (eg, low pay, lack of bargaining power, poor working conditions, etc).
This potential shift to imposed terms and conditions across an entire industry or sector is a large one for New Zealand, which has primarily relied on individually negotiated terms and conditions since the passing of the Employment Contracts Act in 1991.
In March 2020, the government released the COVID-19 Alert Level system with four alert levels. These alert levels remain in place today. Each level specifies the public health and social measures to be taken in the fight against COVID-19. The measures are updated from time to time based on their effectiveness and new knowledge about COVID-19. The Government can specify what Alert Level is imposed on the country and for how long, and may specify different Alert Levels for different parts of the country.
A high-level summary of the Alert Level measures is set out below.
The government provided a range of financial support measures to businesses and individuals affected by COVID-19, including:
Borders and Travel Bubbles
The border was closed to non-New Zealanders on 20 March 2020, with initially extremely limited exceptions. An exception may be provided to critical workers if they can prove they have unique experience and technical and specialist skills that are not obtainable in New Zealand, or if they are undertaking a time-critical role for a Government-approved event, programme or project. Workers who wish to stay in New Zealand for longer than six months are subject to additional criteria. The border closure has continued to have a detrimental effect on industries and businesses that are reliant on migrant workforces or that wish to engage the services of particular individual(s) who do not meet the stringent criteria to receive a border closure exception.
Limited "travel bubbles" have been opened between New Zealand and the Cook Islands and New Zealand and Australia from time to time. This has allowed, for periods of time, for quarantine free travel between these countries. The bubble with the Cook Islands remains open, although the Australian bubble has intermittently been paused due to various outbreaks in Australia.
An "employee" is any individual employed to do work (or intending to work after accepting an offer of employment) for hire or reward under a contract of services. Employment legislation does not distinguish classes of employees by the type of work performed by the employee.
Individuals can be employed pursuant to an individual employment agreement (IEA) or a collective employment agreement (CEA). Employment agreements must be made in writing and signed by both parties. Employers can be fined for failing to provide a written employment agreement. However, failure to record an employment agreement in writing or to have both parties sign an IEA will not invalidate the employment relationship.
IEAs must contain the following terms, although they can contain any other term that is legal and consistent with the Employment Relations Act 2000:
At the time an employment agreement is entered into, the employer must inform the employee about their entitlements under the Holidays Act 2003. This information is usually included in the IEA.
Before an employee can be employed under an IEA, an employer must have provided the employee with a copy of the intended IEA, advised the employee they are entitled to seek independent advice and given the employee a reasonable opportunity to do so, and considered and responded to any issues the employee raised. Employers must retain copies of intended IEAs and finalised IEAs. If requested to do so, employers must provide employees with a copy of the retained IEA.
Employees can be employed on a permanent or fixed-term basis. Fixed-term employment relationships end on a specified date or when a specified event occurs or when a specified project is concluded. There must be a genuine reason based on reasonable grounds for the existence of a fixed-term agreement. Fixed-term employment agreements must record in writing the way the employment will end and the reasons for it ending in that way. If an employment agreement fails to do so, the employee may elect to have their employment treated as permanent.
Employees can be employed on a casual basis where the employee has no guaranteed or expected hours of work. The employer may offer work when work is available, although there is no obligation to do so. The employee, likewise, has no obligation to accept the work. Each time the employee accepts an offer of work it is treated as a new period of employment.
Casual employees have the same rights as other employees but the way their entitlements to annual holiday and other types of leave is calculated may vary from non-casual employees. Casual employees who work on an intermittent or irregular basis may agree with their employer that they receive annual holiday pay with their pay in lieu of their statutory entitlement to annual holidays.
The maximum number of hours to be worked in a week is 40 hours. However, the parties may agree that the number of hours to be worked is higher than 40. Employers have a duty to take all reasonably practicable steps to ensure the health and safety of employees in the workplace, including safe working hours and avoiding fatigue.
Employees are entitled to and employers have a duty to provide rest breaks and meal breaks. The duration and timing of rest and meal breaks is determined by the length of the employee’s work period.
Flexible Working Requests
Employees have a statutory right to make a request at any time for a variation of their terms and conditions to have more flexible working arrangements. The requested variation to working arrangements can be in regard to work hours, work days or place of work (including a request to work from home). The employer must deal with a flexible working arrangement request as soon as possible, but no later than one month after receiving it. Employers must notify the employee in writing whether their request has been approved or refused. Requests may only be refused if the employer determines that the request cannot be accommodated on one or more of the specific grounds specified by the Employment Relations Act 2000. Requests must be refused if the request comes from an employee bound by a CEA and the requested working arrangements would be inconsistent with that CEA.
An employee who is affected by family violence has a statutory right to make a request for a short-term (no more than two months) variation to their working arrangements for the purpose of assisting the employee to deal with the effects of being affected by family violence. The request must be in writing and must specify the variation sought and how that variation will assist the employee. Employers must deal with such a request as soon as possible but no later than ten days after receiving it.
Part-time employees have the same rights and responsibilities as full-time employees. There is no legal definition of full-time work, but it is considered to be 35 to 40 hours of work per week. The number of hours and work days should be specified in the employment agreement. The part-time status of an employee will not affect their entitlement to sick leave, bereavement leave or family violence leave.
There are no overtime regulations in New Zealand. An employer in New Zealand has no statutory obligation to pay overtime and any overtime payments are only payable if provided for in an employment agreement. Employment agreements can contain an "availability provision" under which employees can be required to make themselves available to accept any additional work and to perform that additional work if so required. Waged employees must be provided reasonable compensation for making themselves available to accept work. Employment agreements for salaried employees may provide that the employee’s salary fully compensates the employee for time spent available to accept additional work and time spent performing that additional work. Where an employee’s salary compensates the employee for additional work, the employee must be paid on average at least the minimum wage for each hour worked.
There are three statutory minimum wage rates which apply to employees aged 16 years or more. There are no minimum wage rates for employees under the age of 16 years.
The current minimum wage of NZD20.00 per hour applies to employees aged 16 years and over and who are not starting-out workers (see below).
The current starting-out wage of NZD16.00 per hour applies to employees aged 16-17 years who have not completed six months of continuous work with their current employer. After six months of work they are no longer starting-out workers and must be paid the full minimum wage. The starting-out wage also applies to employees aged 18-19 years who have been paid one or more social security benefits for six months or more and who have not completed six months' continuous service with any employer since they started being paid a benefit. The training wage of NZD16.00 per hour applies to employees aged 20 years and over doing recognised industry training. These employees are often apprentices.
The statutory minimum wage rates apply, even if an employee is paid partly or wholly by commission or by piece rate, and apply to all types of jobs and employees, including home-workers, casual, temporary and part-time employees. Salaried employees must not be paid less than the minimum wage when their gross salary is divided by the number of hours worked.
There is no statutory entitlement to bonuses or pay rises. If an employer intends to provide bonuses or pay rises this should be recorded in the employment agreement. It is best practice to review employees’ performance and pay regularly. The rates of pay, bonuses, review periods and pay rises are subject to an employer-employee agreement.
All parties to an employment relationship are required by the Employment Relations Act 2000 to deal with each other in good faith. This requires employers and employees to be active and constructive in establishing and maintaining a productive employment relationship in which the parties are, among other things, responsive and communicative. The Employment Relations Act 2000 explicitly requires that the parties to an employment relationship must not, whether directly or indirectly, do anything to mislead or deceive each other or that is likely to mislead or deceive each other.
There are very few limitations regarding terms of employment in New Zealand. Confidentiality clauses are common and enforceable in employment agreements where both parties have agreed to their inclusion in good faith. It is common for employers to include a clause that provides for confidentiality of employer information that an employee has access to or works with. The types of information that a confidentiality clause applies to include client and customer information, business and financial information, technical information, know-how, inventions, designs and ingredients.
In general, employers are vicariously liable for their employee’s actions carried out in the course of employment which bear a sufficient connection to the employee’s role. This liability may apply even where the employee’s actions would never have been sanctioned by the employer, such as actions that are fraudulent, defamatory or criminal.
This doctrine of vicarious liability has been developed through the courts of New Zealand and the UK over time. On the whole, there has been less need for development in this area in New Zealand due to the general bar on applicants suing for compensatory damages relating to personal injury. All such claims are covered by the Accident Compensation Corporation which funds coverage through taxes and industry levies.
The Holidays Act 2003 provides the minimum requirements for leave. When an employee enters into an employment agreement, the employer must inform the employee about their entitlements under the Holidays Act 2003 and where further information about these entitlements can be obtained. Employment agreements can provide enhanced or additional leave entitlements but cannot exclude or reduce the minimum requirements as provided for by the Holidays Act 2003.
After each completed 12 months of continuous employment, an employee is entitled to not less than four weeks of paid annual holidays. Annual holidays are to be taken by agreement between the employer and employee. If an employee elects to do so, the employer must allow the employee to take at least two weeks of his or her annual holidays in a continuous period. If agreement on the timing of the taking of annual holidays cannot be reached, the employer may give the employee 14 days’ notice to take his or her annual holidays. An employer may also allow an employee to take an agreed portion of the employee’s annual holiday entitlement in advance of their entitlement.
An employee and employer can agree to have up to a maximum of one week of annual holidays paid out in any annual holiday entitlement year. Unused annual holidays accrue from year to year and cannot be forfeited by an employee and must be paid out to the employee at the end of his or her employment.
Employees whose work is intermittent or irregular and employees on a fixed-term employment agreement of less than 12 months’ duration can have their annual holiday entitlement paid as part of their regular pay. This must be agreed to in the employment agreement and paid at a rate of not less than 8% of the employee’s gross earnings. If payment for annual holidays is made as part of an employee’s regular pay, the annual holiday payment must appear as a separate identifiable component on the employee’s payslip.
There are 11 public holidays. An employee must be paid their relevant daily pay for the public holidays on which they do not work and which would otherwise be a working day for the employee. Relevant daily pay includes applicable overtime and commission payments. If it is not possible or practicable to determine an employee’s relevant daily pay, the employee can be paid for the public holiday at his or her average daily pay.
Employees can be required to work on any public holiday if this is provided for in their employment agreement. Employees who do work on a public holiday are entitled to be paid at 1.5 times their relevant daily pay or average daily pay for all hours worked on the public holiday.
An employee who works on a public holiday that would otherwise have been a working day for them is also entitled to receive an alternative holiday. Alternative holidays must be taken on a day that would otherwise be a working day for that employee. The alternative holiday must be a whole working day off work, regardless of the amount of time the employee worked on the public holiday. If agreement cannot be reached on when an alternative holiday is to be taken, the employer may determine when the alternative holiday is to be taken on a reasonable basis and provide at least 14 days’ notice. Employees can request payment for an alternative holiday after 12 months have passed since the entitlement to the alternative holiday arose. If employees have outstanding alternative holidays when their employment ends, these must be paid in the employees' final pay.
Sick Leave and Bereavement Leave
After six months of continuous employment, New Zealand employees are entitled to ten days’ paid sick leave for each 12-month period of continuous employment thereafter. Sick leave is not prorated, which means that even part-time employees are entitled to five days sick leave per year provided they work an average of ten hours per week with at least one hour per week or 40 hours per month.
Sick leave can be taken if the employee, the employee’s spouse or partner or a person who depends on the employee for care is sick or injured. Up to ten days’ unused sick leave may be carried over from year-to-year up to a maximum entitlement of 20 days in any year. Sick leave is not required to be paid out upon termination.
After six months of continuous employment employees are entitled to three days of paid bereavement leave on the death of the employee’s spouse or partner, parent, child, brother or sister, grandparent, grandchild or the parent of the employee’s spouse or partner, or in the event of a miscarriage or still-birth. Employees are also entitled to one day of paid bereavement leave on the death of any other person if the employer accepts, having regard to certain factors, that the employee has suffered a bereavement as a result of the death.
The Parental Leave and Employment Protection Act 1987 creates a regime providing various types of parental leave to eligible carers of children. Parental leave payments are made by the government, not the employer.
The amount of parental leave an employee is entitled to depends on whether the employee meets the six-month or 12-month employment test or is self-employed.
An employee meets the six-month employment test if they will have been employed by the same employer for at least an average of ten hours a week in the six months immediately preceding the expected date of the delivery of the child or assumption of responsibility for the child. The 12-month test is the same but requires at least an average of ten hours a week in the 12 preceding months.
An employee who meets the 12-month employment test and who is the primary carer of the child is entitled to 26 weeks of primary carer leave, 26 weeks of parental leave payments (from the government) and 52 weeks (inclusive of any primary carer leave taken) of unpaid extended leave. An employee who meets the six-month employment test has the same entitlements but is only entitled to 26 weeks of unpaid extended leave (inclusive of any primary carer leave taken).
If the primary carer is pregnant with a child she will be caring for, she is entitled to ten days' special leave before she gives birth for reasons connected with her pregnancy. Unpaid extended leave can be shared with the primary carer’s partner. Partners may be eligible for up to two weeks of unpaid partner’s leave.
If an employee fails to meet either employment test, they are not entitled to any parental leave but might be eligible for parental leave payments, as long as they are not working. The employee may request negotiated carer’s leave from their employer. Self-employed people who meet the criteria for parental leave payments are entitled to 26 weeks of parental leave payments, as long as they are not working during the period in which they receive the payments.
Employees wanting to take parental leave must notify their employers in writing. Notification must be given at least three months before the baby’s due date or, if neither the employee nor their partner is pregnant, at least 14 days before the employee wishes to begin parental leave. Notification must include certain details specified by law. Employers must reply to an employee’s notification within 21 days; the reply must include whether or not the employee is entitled to parental leave and whether or not the employee’s position can be kept open.
There is a presumption that employees’ positions will be kept open. However, exceptions include where the position becomes redundant or where the employee’s position is a key position and the employee is taking more than four weeks' parental leave.
Family Violence Leave
After six months of current continuous employment or after a six-month period where the employee has worked an average of ten hours per week with at least one hour worked per week or 40 hours worked per month, the employee will become entitled to ten days’ paid family violence leave per 12 months. The purpose of family violence leave is to enable the employee to deal with the effects of family violence. Unused family violence leave does not carry forward into the subsequent 12-month period and is not paid out at the end of the employee’s employment.
Non-competition and non-solicitation clauses are on their face unlawful because they are considered contrary to public interest. However, the courts will enforce these clauses if they can be shown to be reasonable in duration and geographical area and necessary to protect a legitimate proprietary interest of the employer.
The reasonableness of a non-competition or non-solicitation clause will be determined when considered in the context of the entire employment agreement against the background and circumstances that existed when the clause was entered into. In determining whether the clause is reasonable and therefore enforceable, the courts will consider factors such as the nature of the proprietary interest that is sought to be protected and whether that is capable of protection, whether the employee received consideration in exchange for agreeing to the clause, the duration of the clause and its geographical scope. It will also be relevant if the proprietary interest is capable of protection by other means (eg, confidentiality obligations). Restraint periods of between three and six months are commonly upheld as reasonable durations.
The likely enforceability of a non-compete or non-solicitation clause increases with the employee’s seniority and amount of access the employee has had to proprietary information and the employer’s clients.
In practice, non-solicitation clauses are far more likely to be upheld as they are considered generally to be less restrictive. The enforceability of non-competition clauses is regularly the subject of litigation and is more likely to be upheld if they are for short periods, limited in scope and accompanied by a lump-sum payment. While appropriate consideration is required in non-competition clauses, additional payments are generally not required when such clauses are entered into at the same time as the rest of the employment terms, because the offer of employment itself provides consideration.
See 3.1 Non-competition Clauses.
The Privacy Act 2020 cane into force on 1 December 2020 and replaced the Privacy Act 1993.
The Privacy Act 2020 applies to all “agencies” (including employers) that hold personal information about individuals. The Privacy Act 2020 also applies to overseas agencies and individuals (including employers) in certain circumstances. Personal information is information about an identifiable individual.
An employer can only collect an employee’s personal information for lawful and necessary purposes. Personal information should be collected directly from the individual unless the individual has provided authorisation for the employer to collect such information from other sources or if certain other defined circumstances apply. If an employer needs to collect personal information from an individual employee, the employee must be advised of the reason for collection, the individuals and/or entities that will have access to the information and the employee’s rights of access to and correction of that information.
Personal information must be held in a safe and secure manner and must generally only be used for the purposes for which it was collected. It should only be held for as long as necessary for the purposes for which the information may lawfully be used.
An agency that holds personal information must not use that information without taking reasonable steps to ensure that, having regard to the purpose for which the information is proposed to be used, the information is accurate, up to date, complete, relevant and not misleading.
Individuals are entitled to access any of their personal information and may request that such information be corrected. An employer can refuse to disclose information in defined circumstances, including situations where disclosure would reveal a trade secret or would otherwise unreasonably prejudice the commercial position of the person who supplied the information or where the information is “evaluative material” (eg, references) that were given to the employer in confidence.
The new Privacy Act has introduced a privacy breach notification regime. If an agency has a privacy breach that it believes has caused or is likely to cause serious harm to an affected individual, the agency must now notify the Privacy Commissioner and any affected individuals. If it is not reasonably practicable to notify affected individuals, the agency must instead give public notice of the breach. There are some exceptions to notification requirements, such as where notification may reveal a trade secret.
Workers who are not New Zealand citizens must apply for and obtain the correct form of visa before they may start work in New Zealand.
There are numerous types of work visa that foreign workers can apply for through Immigration New Zealand. Each visa has different criteria that the foreign worker must meet, such as the worker’s nationality, age, qualifications and work experience. Some visas allow only certain types of work or allow the visa-holder to work only for a specified employer.
New Zealand’s border has been subject to various restrictions since the beginning of the COVID-19 pandemic. These restrictions may prevent foreign workers obtaining a visa or from entering New Zealand even where a visa has been obtained.
New Zealand employers must take reasonable precautions and exercise due diligence to ensure a person is entitled to work in New Zealand before employing that person. Foreign workers employed in New Zealand must be employed under and in compliance with New Zealand law.
Employers should verify whether a candidate for a position has a visa which allows them to work in that position. Immigration New Zealand maintains an online record of current visas held by foreign workers. Employers may use the Visa Verification Service (the online platform) to confirm whether a visa provided during recruitment is genuine and to confirm whether a visa entitles the visa holder to perform the work on offer. Employers can also rely on certain documents such as passports or Refugee Travel Documents with valid visas.
The Government has announced changes to the temporary work visa system. The new system will see six temporary work visa types replaced with one, called the Accredited Employer Work Visa (AEWV). The new system is expected to come into effect in mid-2022. Under the new system, all employers wanting to employ a migrant on an AEWV will need to be accredited by Immigration New Zealand. Accreditation will be split into two categories: standard accreditation (for employers with up to five employees on an AEWV at any time) and high-volume accreditation (for employers with six or more employees on an AEWV at any time). Detailed policy on accreditation requirements has not yet been released. Accreditation under the new system is distinct from the current form of accreditation which can no longer be applied for.
Unions are regulated by the Employment Relations Act 2000, which recognises the role and entitlement of unions to promote their members’ collective employment interests.
Unions are more prevalent and active in the public sector and in the health and education sectors. The vast majority of non-public sector employees are non-unionised and whose terms and conditions of employment are covered by IEAs. Union membership had generally been slowly falling in New Zealand; in 2018 13.29% of the employed labour force were union members, down from 14% in 2017 and 17% in 2012. However, there has more recently been an increase in union membership, with the proportion of paid employees who are union members increasing to be 17.7% at 31 December 2018, according to a 2019 survey from the Centre for Labour, Employment and Work.
It is possible to belong to a union and be employed under the terms of an IEA, however, few unionised employees choose to do so.
Employees must not be discriminated against by their employer (or employer’s representatives) on the basis of their union membership status or involvement in union activities. Employees who believe they have been discriminated against may raise a personal grievance.
A society may apply for union registration with the Registrar of Unions, which must register the society as a union if it is eligible. The Registrar of Unions must give the registered union a certificate of registration. A society is eligible to be a union if it is an incorporated society which has at least 15 members, is independent of employers and its object is to promote its members’ collective employment interests and its rules are reasonable, fair, legal and contain a secret ballot provision. A union’s registration can be cancelled by the Registrar of Unions in some circumstances.
Union delegates (union members who have been nominated and elected by their colleagues into the role) are entitled to spend reasonable paid time undertaking union activities during their normal work hours. Employers may only refuse to allow a union delegate to undertake union activities if it will unreasonably disrupt the business or the union delegates' employment duties.
In New Zealand collective employment agreements (CEAs) must be in writing and signed by the employer(s) and union(s) that are party to the CEA. A CEA must contain:
CEAs may contain any other clause that is legal and consistent with the Employment Relations Act 2000.
An individual employee bound by a CEA can agree with their employer that they will be covered by additional individual terms. This agreement can occur before or after the employee becomes bound by the CEA. The individual terms must be consistent with the CEA.
CEAs come into effect on the date stated in the CEA. If no date is stated, it will come into effect on the date the last party signs it. CEAs expire on the date stated in the CEA or three years after it came into effect, whichever is the sooner. When a CEA expires, the employees who were covered by that CEA will be automatically covered by IEAs with the same terms as the expired CEA, although employers and employees can then agree to alter the terms.
The terms of CEAs are negotiated through a collective-bargaining process. All parties involved in collective bargaining have a duty to act and communicate in good faith before, during and after collective bargaining.
Collective bargaining is initiated by an employer or union by giving the other party or parties a notice initiating bargaining. When a party may initiate bargaining is determined by whether that party is a union or an employer and whether a collective agreement exists currently or has existed in the past. A notice initiating bargaining is a signed letter that says that the party intends to bargain for a collective agreement, who the intended parties are and the intended coverage clause of the CEA. Employers must inform all employees whose work would be covered by the intended coverage clause about the bargaining.
Initiating Collective Bargaining
Where there are no applicable CEAs, a union may initiate bargaining at any time. An employer may initiate bargaining at any time, but only if the proposed coverage clause will cover work that was previously covered by a CEA to which the employer was a party.
Where there is a single applicable CEA, unions may initiate bargaining no earlier than 60 days before the CEA expires. Employers may initiate bargaining no earlier than 40 days before the CEA expires.
Where there is more than one applicable CEA, the earliest that a union may initiate bargaining is the later of:
For employers, these timeframes are 100 and 40 days respectively.
Employers and unions bargaining for a CEA have a duty to conclude that bargaining, unless there are genuine reasons based on reasonable grounds for not doing so. Opposition or objection in principle to being a party to a CEA is not a genuine reason.
The 30-Day Rule
Any new employee of an employer who is party to a CEA which covers that employee’s position must be employed on the terms and conditions set out in that CEA for the first 30 days of employment. The parties may mutually agree to additional terms as long as they are no less favourable than the terms in the CEA.
All dismissals (and other actions taken by an employer which could disadvantage an employee in their employment) must be for a justifiable cause. The test for whether a dismissal is justifiable is whether the employer’s actions and how the employer acted were what a fair and reasonable employer could have done in all the circumstances at the time the dismissal occurred. Employers should be able to demonstrate substantive grounds for the dismissal and that a fair and reasonable process was followed before the dismissal occurred.
A fair process requires the employer:
Where an employee is terminated for low-level misconduct or poor performance, the employer should follow a performance-management and/or warning process, usually comprised of at least two warnings before a justified dismissal can occur. Summary dismissal for serious misconduct is discussed in 7.3 Dismissal for (Serious) Cause (Summary Dismissal). Other grounds for terminating employment include redundancy, medical incapacity, incompatibility and frustration of contract.
Restructuring and Redundancy
If an employer wishes to restructure its organisation, it must have a justifiable operational reason for doing so and must undertake a fair process, including consultation with the affected employees. Consultation processes vary widely, depending on the complexity of the proposed changes and the number of staff affected. Employees are entitled to be represented throughout the process by a union or any other representative. A typical process should involve:
Consultation must be genuine and employees should have the opportunity to influence the proposal, not merely comment on it. As part of the statutory duty of good faith, the employer is required to provide all information relevant to the proposed dismissal. In redundancy situations, this will include financial information to support any proposed cost-savings or information on current business pressures.
There is no statutory minimum notice requirement for termination. The employer is obliged to provide employees with the period of notice specified in their employment agreement. Notice for salaried staff is typically four weeks. If the agreement is silent on notice, "reasonable notice" must be provided. What is reasonable will depend on factors such as seniority, length of service and company practice. Many contractual notice clauses will provide the employer with the right to elect to pay the employee in lieu of notice or place the employee on garden leave for all or a portion of the notice period.
There is no statutory requirement to provide a severance package or redundancy compensation to terminated staff. Parties may include a contractual entitlement in the relevant employment agreement. Redundancy compensation is common in CEAs but less common for employees employed on IEAs.
There is no statutory definition of serious misconduct. Many employment agreements or policy documents set out examples of what the employer considers to be serious misconduct. Common examples include theft, fraud, gross negligence or gross insubordination. The Employment Court has emphasised that a definition of serious misconduct is not possible, but it is generally considered to be conduct that deeply impairs or is destructive of the relationship of trust and confidence between the employer and employee.
Summary dismissal must be justified in accordance with the test set out in 7.1 Grounds for Termination. Employees who are summarily dismissed are entitled to be paid up to their last day of work and receive payment for any unused annual holiday.
There is no statutory requirement to enter into any agreement when an employment relationship is ended by termination. Where problems have arisen in an employment relationship, the parties may agree to enter into a Record of Settlement under Section 149 of the Employment Relations Act 2000 to bring the employment to an end and settle the differences between them.
A Record of Settlement can include any term as agreed by the parties, but such terms must acknowledge that the employee has not forgone any minimum employment entitlements. A mediator from the Ministry of Business, Innovation and Employment then signs the Record of Settlement in accordance with the Employment Relations Act 2000. Once a mediator has signed the Record of Settlement it can only be challenged in very limited circumstances.
The parties can enter into a termination agreement outside of the above process but they will likely not be able to enforce that agreement in the employment jurisdiction.
Businesses in certain industries, such as the education and healthcare sectors, experience frequent restructuring. Employees who provide cleaning, food catering, caretaking, laundry, security and orderly services in those industries are considered to have little bargaining power and so are vulnerable to redundancy. The Employment Relations Act 2000 provides statutory protection to these employees by giving them the right to elect to transfer to the new employer in the event of a restructure that results in their work being performed for a new employer.
Employees on parental leave are protected against dismissal in certain circumstances. Their dismissal on the grounds of redundancy will only be justified in limited circumstances.
Union delegates are protected from dismissal arising from or related to their duties as a delegate and dealing with the employer in that capacity.
There is no specific action of “wrongful dismissal” in New Zealand, see"Unjustified Dismissal" below. However, if an employee considers they have a grievance against their employer or former employer, they are entitled to pursue a personal grievance under the Employment Relations Act 2000. Personal grievances may be brought because of a claim that:
Employers do not have a statutory duty to resolve the grievance (subject to the statutory duty to deal with employees in good faith), but should note that if the grievance is not resolved the employee may apply to the Employment Relations Authority in the first instance for the resolution of the grievance.
Personal grievance claims must be raised with the employer within 90 days of the action that amounted to the alleged personal grievance. An employer can consent to a personal grievance being raised out of time. If an employer does not consent, the employee can seek leave from the Employment Relations Authority to raise the personal grievance. No action may be commenced before the Authority or a court in relation to a personal grievance more than three years after that personal grievance was raised.
Personal grievance claims most frequently arise as unjustified action or unjustified dismissal claims. Raising a personal grievance is the only means by which a terminated employee can challenged their dismissal. The employee may challenge:
Employees and applicants for employment are protected from discrimination by the Human Rights Act 1993 and the Employment Relations Act 2000. It is unlawful to discriminate any person on the grounds of their:
There are exceptions to this protection in very specific circumstances.
If an employer discriminates against an employee or applicant for employment on any of the grounds listed above, the employee may raise a personal grievance or make a complaint under the Human Rights Act 1993.
Specialist forums exist for the resolution of personal grievances and other employment-related disputes (collectively known as employment relationship problems). These forums include: the Employment Mediation Services, the Employment Relations Authority and the Employment Court.
Employment Mediation Services
Employment Mediation Services is a free and confidential service run by the Ministry for Business, Innovation and Employment. Mediation is almost always required prior to matters proceeding to the Employment Relations Authority. Mediation is confidential and without prejudice. An independent mediator will try to explore settlement options with the parties; however, the parties are not obliged to agree to any settlement terms. Mediators can give recommendations to the parties to assist in settling a problem and the parties can agree at the beginning of the mediation to be bound by any such recommendation. However, this rarely occurs in practice.
Employment Relations Authority
If the parties cannot resolve the issue, the problem may be taken to the Employment Relations Authority. The Employment Relations Authority is an investigative body that has the role of resolving employment relationship problems by establishing the facts and making a determination according to the substantial merits of the case, without regard to technicalities. If proceedings are filed with the Employment Relations Authority, the parties will be directed to attend mediation unless they have already done so. Occasionally, the Employment Relations Authority determines that there is a good reason not to mediate. Equally, the Authority may direct the parties to return to mediation even if they have attended mediation previously.
Approximately 85% of employment relationship problems that arise are resolved by agreements that usually involve a mediator at some point. An increasing number of employment relationship problems are resolved directly between the parties (and their legal advisers) and then formally signed off by a mediator to give the settlement agreement statutory protections under Section 149 of the Employment Relations Act 2000.
If a party to a matter before the Authority is dissatisfied with the determination of the Authority or any part of that determination, they may have the matter heard by the Employment Court. This hearing may be de novo (that is, a new hearing of the entire matter) or a challenge to an appeal from a determination of the Authority. Additionally, a party before the Authority may apply for the matter to be removed to the Employment Court. The Authority may also remove a matter to the Employment Court of its own motion if satisfied that the circumstances of the case require such removal to the court. Where any party to a proceeding is dissatisfied with any decision of the Employment Court as being erroneous on a point of law, that party may, with the leave of the Court of Appeal, appeal to the Court of Appeal within 28 days after the date of the decision from the Employment Court.
There are no federal, province/state or city levels for claims. Class-action claims are not generally available, due to the individual nature of most employment relationships; however, unions may bring an action where the issue is identical for a number of employees represented by the union.
As mediation is a key part of nearly all legal proceedings in the employment jurisdiction, other forms of alternative dispute resolution are not so commonly used. Sometimes, private mediation (ie, outside of the mediation provided by the state) is arranged due to time constraints or sensitivities. Judicial settlement conferences can also take place in the Employment Court.
The successful party in litigation will generally be entitled to a contribution to its costs. However, cost recovery in the Employment Relations Authority is assessed by applying a daily cost-recovery rate in relation to the proceeding or application. Costs in the Employment Court are more discretionary, although are generally based on published "bands".
Cost recovery will almost certainly never cover the successful party’s actual costs unless an award of indemnity costs is made against the unsuccessful party (which is rare). This tends to drive a large number of settlements and employers will often settle claims for no other reason than to avoid the costs of litigation, which they know they will not recover.
When parties settle an employee’s personal grievance via a Record of Settlement, it is common practice for the employer to contribute a sum towards the employee’s legal costs (if any), although there is no requirement to do so.
New Zealand: Fortunate Stability, but Changes on the Horizon
Over the past decade or so, New Zealand has been seen internationally as a stable country; in social, political and economic terms. This reputation has been burnished even more over the last 12 months by its highly successful response to the COVID-19 global pandemic. Save for one significant national lockdown of seven weeks in March and April 2020, and a shorter lockdown focussed on Auckland later in the year, COVID-19 has largely been absent from New Zealand. As a result, so too have significant restrictions on New Zealanders’ way of life.
New Zealand has increasingly been seen as a safe place for business, with merger and acquisition activity on the rise. Stability in business has largely been mirrored by stability in employment law, with both sides of the political spectrum "tinkering around the edges" with relatively minor legislative updates since the passing of the Employment Relations Act in 2000. However, there are some potentially significant changes on the horizon.
Challenges to employment status
New Zealand’s labour market has been extremely stable over the previous decade or more. However, it has not been immune to the trend of increased straining against the orthodox labels placed upon "workers". From the challenges of the "gig economy" to the disruptions of the ongoing global pandemic, these labels are becoming increasingly problematic, with some questioning whether they remain appropriate.
In New Zealand, there are currently only two categories of workers who provide services: employees and independent contractors. As in most common law countries, the employment relationship is governed by a "contract of service" between an employer and employee, and this is seen as a special relationship in New Zealand. Parties to an employment relationship are required to deal with each other in "good faith", and all employees are provided with a set of minimum entitlements by legislation. Employees in New Zealand cannot be dismissed "at will", with any termination having to be for cause.
In contrast, independent contractors are offered no such safety net. They are engaged by a "contract for service", and their engagement can simply be ended on notice without cause. As in many jurisdictions, the attraction of being an independent contractor often lies in greater flexibility, higher rates of compensation, and the ability to deduct business expenses. For many highly skilled workers especially, the risk of termination on notice without cause is worth it.
For many at the lower end of the skills market however, choices are a little more limited. Service industries like ride-sharing, taxi drivers, and courier delivery mandate that individuals are engaged as independent contractors, for a host of reasons. These industries have been the focus of recent challenges to employment status in New Zealand, and abroad.
Internationally, the Uber ride-share platform is perhaps best known for being the focal point of challenges to employment status. That is also the case in New Zealand, although the result of the most recent Uber-related decision has perhaps gone against the international trend towards these types of workers being classified as employees, or at least not as regular independent contractors.
In a decision of the Employment Court, Raiser New Zealand Limited (Uber) successfully defended a claim by Mr Arachchige, an Uber driver who had completed 5,632 trips, that he was an employee rather than an independent contractor. The Court was required to determine, under section 6 of the Employment Relations Act 2000, what the “real nature of the relationship” between the parties was. In doing so, the Court must consider all relevant matters, including anything that indicated the parties’ intention when entering into the arrangement. Also relevant are the extent to which ‘control’ is exercised over the individuals work, and the degree to which the individual can be said to be in business on their own account.
The agreement between the parties expressly rejected the prospect that an employment relationship could be created. The Court found that throughout the engagement, Mr Arachchige did in fact operate his business independently of Uber, engaging with other competing organisations for work, and supplying his own vehicle, smartphone, and insurance. He also determined his working days, hours and location of service.
The Court also noted that it was only after Uber terminated the agreement that Mr Arachchige contested the nature of the relationship between the parties. On balance, the Court found that Mr Arachchige was not an employee. In doing so, it commented on the recent UK Supreme Court decision that Uber drivers are "workers", not independent contractors. The decision was relied on in part by Mr Arachchige. The Court was quick to distinguish the Supreme Court’s decision however, noting that the third category of "worker" does not exist in New Zealand.
The Court also distinguished two earlier decisions of the Employment Court which had found that a courier driver and four taxi drivers were in fact employees of the companies that engaged them. In both those cases, the Court held that the employees were not genuinely in business on their own account, and they were subject to significant control by the employing companies. Examples of this control included being set pre-determined routes, set days and hours of work, limited holiday entitlements, and controlled vehicle arrangements (including in one instance being required to purchase a vehicle from the employer). This was contrasted to Mr Arachchige’s significant autonomy when working for Uber.
The above cases illustrate that challenges to employment status in New Zealand continue to be finely balanced, and an area of ongoing difficulty for businesses. The issue may not get simpler either; a 2019/2020 discussion paper commissioned by the government recommended that better protections should be put in place for contractors, including the potential for a third "dependent contractor" category, similar to the "worker" category in the UK.
Fair Pay Agreements
In what could potentially be the most significant change to the employment landscape in New Zealand in decades, the government has announced that legislation providing for the negotiation of Fair Pay Agreements (FPAs) across certain industries or occupations will be introduced later in 2021.
An FPA will set out the minimum entitlements and working standards for all employees in a specific industry or occupation. Parties to an FPA will collectively bargain in an attempt to reach an agreement on the terms of the FPA. Once it is agreed, it will then legally bind all employees and employers across the particular industry 6 even those that did not participate in the bargaining process.
It is currently proposed that bargaining for an FPA would be initiated by the union representing the employees across the industry. To do so, the union would first have to demonstrate that it has sufficient support to represent these employees. It would need to satisfy the Employment Relations Authority that it has the support of 10% of all employees across an industry or occupation, or 1,000 employees, whichever is the lesser. It could also meet a ‘"public interest" test not aligned to employee numbers, which requires a demonstration that a particular industry has low pay, low bargaining power, or poor working conditions generally.
Each FPA would have to cover certain terms, including base wage rates and overtime, but could include other terms agreed by the parties. If bargaining parties encounter difficulties, it is currently proposed that recourse would be available to the Employment Relations Authority to set the terms of the FPA, although mediation would likely first be required. Once the terms were agreed, a simple majority vote among employers and employees would see the FPA approved, and bought into force by way of secondary legislation.
While many jurisdictions will be familiar with minimum terms being set and imposed across industries, including Australia across the Tasman Sea, most New Zealand employers have no experience at all with these types of workplace instruments. For close to 30 years, New Zealand employers have had the ability to negotiate and agree on terms and conditions directly with employees or, in more rare circumstances, with a union.
It remains to be seen how quickly the legislation will be drafted and when it would thereafter come into effect. Even once the law is in place, given the amount of work required for a union to even demonstrate that it has sufficient support of employees in a particular industry, it will be some time before a significant amount of FPA bargaining is initiated. It is also anticipated that there will be a significant number of disputes arising around the classification of a particular "industry" or "occupation", and which employees fall within those classifications.
As a result, it is perhaps more likely that unions will initially target "employee-heavy" industries such as retail and supermarkets. One tool that can give the unions leverage in any negotiation has been removed - employees will not be permitted to strike while bargaining for an FPA. Nonetheless, this development in New Zealand employment law does represent a fundamental shift in the landscape, and could have profound effects on certain industries.
Increasing minimum entitlements
Recently there has also been an increase in minimum entitlements for New Zealand employees to paid sick and bereavement leave. From 24 July 2021, all employees who qualify for paid sick leave are now entitled to ten days per year, a doubling of the previous entitlement. The policy reasons for this increase gained momentum as a result of the global pandemic, with five days’ paid sick leave for employees who caught COVID-19, or had to isolate because they may have, being seen by many as insufficient.
In addition, bereavement leave now includes cover for an employee who suffers a miscarriage (the end of a pregnancy within the first 20 weeks) or still-birth. This leave is extended also to the spouse/partner of the individual who suffered the miscarriage or still-birth, or the person who was the biological parent of the child (if not a spouse or partner). This inclusion, which is rare internationally, has been heralded as addressing a gap in coverage and rectifying a previous inequality between parents who lose a child during pregnancy and those who do so after birth.
Continued stability, for now
Overall, New Zealand remains a stable place for business. Its employment laws have generally avoided large scale shifts or uncertainty. Familiar challenges do however exist with the classification of workers, and the traditional categories individuals are placed in are perhaps becoming unfit for purpose.
Fair Pay Agreements have created some uncertainty around terms and conditions in particular industries, although it remains to be seen how widespread these will be, and how many will be agreed before any legislation potentially comes under threat from a new government.