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, the 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 (under the Health and Safety at Work Act 2015) 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, workdays 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 the 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 in order to have time to deal with the effects of this 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 workdays 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.
However, employment agreements for migrant employees who are employed on an Accredited Employer Work Visa must state the maximum hours of work per week before being paid overtime, the overtime payment arrangements, and the maximum hours of work per week inclusive of overtime hours.
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 NZD22.70 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 NZD18.16 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 benefit(s) 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 NZD18.16 per hour applies to employees aged 20 years and over who are 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 they apply to all types of jobs and employees, including home-workers and 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.
Bonuses and Pay Increases
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 type of information that a confidentiality clause applies to includes 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 their annual holidays in a continuous period. If agreement on the timing of annual holidays cannot be reached, the employer may give the employee 14 days’ notice to take their 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. They cannot be forfeited by an employee and must be paid out to the employee at the end of their 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 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 12 public holidays per year. 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 their 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 once 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 ten days’ sick leave per year provided they work an average of ten hours per week, with at least one hour worked every 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 stillbirth. 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 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 preceding 12 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 every week, or 40 hours worked per month, the employee will be 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-compete and non-solicitation clauses are technically 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-compete 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 the employer is seeking to protect and whether it can be protected, 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 whether the proprietary interest can be protected 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 or customers.
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-compete 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-compete 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 2.1 Non-competes.
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.
Privacy Breach Notification
The 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. However, from 31 July 2022, all visa categories will be open for application by visitors from anywhere in the world.
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, or is entitled to apply for 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 made changes to the temporary work visa system. Six temporary work visa types have been replaced by one, the AEWV. The AEWV system came into effect on 4 July 2022. Under the AEWV system, all employers wanting to employ a migrant on an AEWV need to be accredited by Immigration New Zealand. Accreditation is split into four categories:
As discussed below in 5.3 Other New Manifestations, “mobile” or “hybrid” working, and remote work, have become much more commonplace in New Zealand since the start of the COVID-19 pandemic. These less-than-traditional forms of working give rise to additional legal considerations for employers, particularly in relation to privacy matters, health and safety considerations, and social security concerns.
Remote network access, as is usually required by employees who are working remotely, increases concerns for the security of personal information. Ultimately, the provisions of the Privacy Act 2020 (see 3.1 Data Privacy Law and Employment) still need to be adhered to, in addition to some training regarding the protection of personal information and additional security measures that should be applied when working remotely. For example, employees will need to ensure they take work calls of a sensitive nature in a private place. There will also be some additional cybersecurity measures businesses will need to implement when employees are working remotely.
The Health and Safety Act 2015 (and its associated regulations) contains a general duty to eliminate or minimise, as far as reasonably practical, all risks to health and safety (both mental and physical). If employees work from home, additional obligations are created given that the employee’s home has become a place of work. This may mean that it is appropriate for employers to conduct health and safety assessments of the employee’s home and/or to take measures to reduce the risk of social isolation.
These issues make the implementation of effective employment policies all the more important.
Sabbaticals, or extended periods of leave from work, are usually granted by employers to employees they value, so the employee can take an extended break as a reward for long service, to pursue other personal or professional/educational interests, or simply to rest and recalibrate. Sabbatical leave can also aid productivity, reduce turnover or attrition, and improve engagement and good will.
Sabbaticals can be of varying duration, as agreed between the employer and employee, and can be paid or unpaid. Generally, the employer’s policy on sabbatical leave should govern these matters, including the circumstances under which sabbatical leave will be declined. It should also outline how the provisions of the Holidays Act 2003 will apply to the employee concerned, in terms of payment during the sabbatical and the employee’s continuity of employment. For example, an employer must expressly agree that the sabbatical will not affect the employee’s anniversary date, and it will not have any impact on the employee’s annual holiday entitlement (and its calculation).
Regardless of whether the sabbatical leave is paid or unpaid, an employee remains employed for the duration of their sabbatical and is entitled to return to their normal role following the end of the leave period.
While the COVID-19 pandemic was very unwelcome, it sped up the rate at which workplaces in New Zealand were forced to consider alternative ways of working. From purely remote set-ups and the reduction of physical office floor space, to hybrid working arrangements, “hot-desking”, the use of social and audio-visual technology, and back to the traditional office-based approach, there is no longer a one-size-fits-all when it comes to modes of working.
More organisations across the country are trialling four-day working weeks, although the New Zealand government has not gone as far as other countries which have passed legislation on the topic of its availability to employees. This trend has possibly emerged as a result of organisations having a greater awareness of the importance of employee wellbeing and its long-term impact on productivity, another matter heightened in importance by the COVID-19 pandemic.
While each arrangement provides different challenges for employers and employees alike, it is more important than ever that employers establish policies that clearly outline the rules that apply to these new forms of working, and ensure that they are applied fairly, while the various employment law and legislative requirements continue to be adhered to.
COVID-19 has also seen New Zealand battle skill shortages, and there has been a notable surge in immigration law changes in an attempt to reduce this shortage. In addition to labour supply, an ageing workforce, and a focus on artificial intelligence or, at least, job automation, New Zealand’s working environment will remain in a state of upheaval for the foreseeable future.
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 their terms and conditions of employment are covered by IEAs. Union membership in New Zealand has generally been declining; in 2018, 13.29% of the employed labour force were union members, down from 14% in 2017 and 17% in 2012. However, more recently, there has been an increase in union membership, with the proportion of paid employees who are union members reaching 17.7%, 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 this.
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, has at least 15 members and is independent of employers. Its objective should be to promote its members’ collective employment interests and its rules should be reasonable, fair, legal and include a provision for secret ballot. 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 delegate’s 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.
A CEA comes 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. A CEA expires on the date stated in the CEA or three years after it came into effect, whichever is earlier. 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 will fall under 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 covering the 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. 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 IEA employees.
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 to the relationship of trust and confidence between the employer and employee.
Dismissal for (serious) cause (also known as 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 by 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 delegates 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 (except for personal grievances that allege sexual harassment; where the employee has 12 months within which to raise the 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 against 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.
Since 2010, any participant in employment court proceedings may apply to take part in proceedings remotely by audio-visual link (AVL) by virtue of the Courts (Remote Participation) Act 2010, and remote attendance at mediation and any judicial direction/management conference (via video or telephone link) is also now well established.
The employment court has since issued the “Guidelines for appearing by audio-visual link, including in Virtual Hearings” (Guidelines pursuant to the Act, which are intended to assist a participant with their application to appear remotely). These Guidelines outline the criteria to be considered when a remote participation application is made, such as:
The employment court has also issued a “Summary of Guidelines for a Witness giving evidence by audio-visual link including in virtual hearings” and the “Guidelines for Remote Viewing of Hearings”.
The most recent change (albeit relatively minor) made in relation to the digitalisation of employment court proceedings is listed under number 13 of the employment court’s Practice Directions, which deals with the presence of observers at telephone or video-conference hearings. This direction states that there is generally no restriction on who may be present at a hearing in open court, including when the hearing is being conducted by telephone or AVL. It provides further clarity around such an occurrence.
The above-mentioned guidelines do not replace orders made by a judge, and the employment court retains its general power to regulate its own proceedings.
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 should be 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, which 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 Authority, the parties will be directed to attend mediation unless they have already done so. Occasionally, the 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 (ie, 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 by the employment court.
There are no federal, provincial/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 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 they 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). The cost aspect 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.
Continued Incremental Change in Familiar Areas
The New Zealand employment law landscape continues to be relatively stable. There are, however, continued incremental changes and developments in certain areas, and some uncertainty with a general election in late 2023 that could result in a change of government (and resulting changes to employment laws).
The perennially difficult issue of employee classification remains before the courts in significant litigation, and new “Fair Pay Agreement” legislation is gaining traction, although is under threat from a potential change in government. An upward trend in awards in New Zealand’s employment jurisdiction also continues, which employers should be aware of.
Ongoing “Employee Status” Developments
As in many jurisdictions, just what an “employee” is continues to be a challenging area for New Zealand employers, jurists and society at large to grapple with. Ongoing litigation between individuals (supported by unions) and a certain multinational “ride-share” company has the potential to reshape this issue further. The distinction between employees and “independent contractors” is an important one in New Zealand; employees are entitled to a raft of “minimum entitlements” under the law, including annual leave, minimum wage, sick leave, and superannuation contributions, while contractors are not.
A relatively recent decision of the Employment Court found that four Uber drivers were employees of Uber, not independent contractors.
Two unions had sought declarations on behalf of the drivers that the real nature of their relationship with Uber was one of employment. The defendants were five separate companies within the Uber group, jointly operating the transportation and meal delivery digital platform. Uber argued that collectively, they simply facilitated a contractual relationship between drivers and passengers (in the case of rideshare) or restaurants and consumers (in the case of meal delivery).
The Chief Judge of the Employment Court disagreed, and held that all four drivers were employees of Uber. The Court took a broader approach when interpreting the definition of an employee under New Zealand law, largely departing from the traditional “control”, “integration” and “fundamental” tests laid down by the Supreme Court 20 years ago in the Bryson decision (the famous long-running litigation centred around an individual who worked on the Lord of the Rings series). The Court noted that Bryson preceded the emergence of the gig economy and technology platforms, and in any case, the Bryson tests for assessing employment status were not prescriptive. The real nature of the relationship should be assessed in a way which “advances the underlying social purposes” of the Employment Relations Act 2000, in protecting vulnerable workers and maintaining minimum standards in the labour market.
The Court acknowledged that some of the traditional indicators of an employment relationship were missing in the present case, for example, that the drivers were not obliged to present in a physical workplace at particular times, nor to undertake work on demand, or on stipulated days.
Nevertheless, the Court thought that Uber’s characterisation of itself as a mere facilitator was not supported by the evidence, which showed that Uber exercised a high level of control and subordination over drivers. Uber dictated the contractual terms under which the drivers performed services and placed strict restrictions on drivers. The drivers were also economically dependent on Uber and were not in reality running their own business. Key factors that pointed towards this were:
Given Uber’s discretion to control fares, service requirements, guidelines, and the terms and conditions of the transportation services, as well as other business aspects such as marketing, the Court found that Uber was the only party running a business in this situation, which pointed towards a relationship of employment.
Care must always be exercised to avoid an overreaction to these types of cases. There is often a rush to extrapolate broad themes and approaches to “employee v contractor” questions, but it must be remembered that the Court’s declaration of employee status only directly applies to the four drivers involved in this case. Determination of employee status under New Zealand law is intensely fact-specific, and requires an individual assessment in each case.
As an illustration of this, a previous decision of the Court in relation to an Uber driver found that the driver was an independent contractor. However, given the uniformity of the Uber operation and the conditions to which drivers are subject, it is fair to say that the judgment would have significant implications for the rest of Uber’s workforce (should they choose to challenge their employment status).
Uber has since been granted leave to appeal the decision to the Court of Appeal. That Court (and potentially New Zealand’s Supreme Court ) may see this as an opportunity to reflect on the Bryson tests and their applicability in the gig economy, and to provide greater certainty in this area.
While a judgment from the appeal will likely not arrive until 2024, businesses operating in the gig economy (particularly app-based or digitalised businesses) should reflect on whether their contractor arrangements are similarly marked by the factors of subordination and control which led to the Court’s conclusion in this case. The Court has clearly signalled that, with the evolution of the workforce, with greater flexibility and casualisation, as well as digitisation becoming a norm, the approach to determining employee status should likewise evolve.
The government had previously signalled that it was considering measures to ensure that workers (in the broader sense) are appropriately classified. However, there is no prospect of any changes prior to the 2023 election in October, with the government putting this work on hold while the case makes its way through the courts.
Fair Pay Agreements – Uncertainty Remains
The Fair Pay Agreements Act came into effect earlier this year, which could be considered the biggest change in New Zealand’s employment relations landscape in 20 years. The Act sets up a framework for bargaining fair pay agreements (FPAs) that, once in place, will set industry- or occupation-wide minimum employment terms.
Bargaining and notification
A union will be able to initiate bargaining for an FPA where at least 1,000 or 10% of covered employees support this. Alternatively, a union can initiate bargaining if it meets a public interest test (where, for example, employees within coverage of the proposed FPA receive low pay and have little bargaining power). Thresholds for these tests are set out in regulations.
A union must apply to the Ministry of Business, Innovation and Employment (MBIE) for approval to initiate bargaining. If approval is given, unions, employers and the government all have notification obligations.
Bargaining will be undertaken by employee bargaining parties (ie, eligible unions), and employer bargaining parties (generally eligible employer associations). A duty of good faith (similar to that contained in the Employment Relations Act 2000) will apply to all bargaining parties.
FPAs must include certain mandatory terms. This includes terms relating to hours of work, payment (including minimum wages, overtime, and penalty rates), leave entitlements, training and development and governance.
Bargaining sides must also discuss other topics, including health and safety, arrangements relating to redundancy and flexible working, although they are not ultimately required to be included in the FPA. Other agreed terms can be included if they relate to the employment of covered employees and are not contrary to law or inconsistent with the Act.
Once bargaining has concluded, the FPA will go through a ratification and verification process before it comes into force. Covered employers and employees will get a chance to vote on the proposed FPA. Ratification requires a simple majority of employees and employers to vote in favour of the FPA.
Finalised FPAs will apply to all employers and employees within coverage, even if they did not participate in bargaining or vote to ratify the FPA.
Disputes and enforcement
The Act provides for a dispute resolution process similar to that under the Employment Relations Act 2000, including access to mediation and bargaining support services provided by MBIE.
In the event that a dispute cannot be resolved between the parties, the parties can apply to the Employment Relations Authority. This includes requesting that the Authority fix the terms of an FPA in certain situations, such as where the parties are unable to agree and have exhausted all other reasonable alternatives for reaching an agreement or where the employer side does not have a bargaining representative.
Parties to bargaining and/or an FPA will be liable for penalties in the event of a breach of obligations in the Act or breach of an FPA.
Potential areas of uncertainty
The new FPA framework is controversial and complex. The FPAs Bill was the subject of substantial opposition during its passage through Parliament and many concerns were raised about aspects of the proposals from a very early stage. The National Party has promised to repeal the law if it wins the upcoming 2023 election.
Despite this, few changes were made to the legislation during the parliamentary process. As a result, there are still many parts of the legislation that are unclear and highly controversial. This will inevitably lead to early litigation when bargaining for the first FPAs commences – or potentially at the point when the first application for approval to initiate bargaining is made.
Some particular areas that are likely to be the subject of dispute are outlined below.
Defining the coverage of a proposed FPA
While the accompanying Regulations provide some further clarification on how to define an occupation or industry, including providing for the use of acceptable occupational codes where applicable, some of these codes are stale and often do not cover all situations.
Duty of good faith
There is also the question of how the duty of good faith will operate between employers on the same bargaining side who are otherwise competitors, particularly if bargaining requires potentially commercially sensitive information to be shared.
Fixing FPA terms
The Authority’s power to fix terms of an FPA, including when and how these can be used, is much more onerous on parties than the power granted to the Authority to fix the terms of a collective agreement under the ERA, which is rarely used. The power to set terms where an employer group is not represented or cannot agree on representation at bargaining is particularly controversial as employers could then be bound by terms for which they have not had a chance to bargain. Some have also raised concerns about the ability or capacity of the Authority to set these terms.
Multiple FPAs covering the same group of employees
The Authority’s ability to determine which agreement will apply to employees in the event that two or more different FPAs cover the same group of employees could result in some employers/employees being bound by an agreement that is not suited to their work environment.
Progress so far
As expected, occupations such as bus drivers, hospitality workers, and security guards have been the first to start bargaining for an FPA. Unions have made various applications to bargain in these sectors, with six approved to initiate bargaining this year, and another currently being assessed.
As noted above, the numerous gaps in the current Act will inevitably need to be addressed through litigation. The time that litigation will take to progress through the Employment Relations Authority and Employment Court will likely severely delay finalisation of any FPAs. The large and looming “elephant in the room” is that the opposition National Party has promised to repeal the Act should it get into power following the election in October this year. It is likely that no FPAs will be finalised by the election, and a real prospect that a change in government occurs, leaving the fate of FPAs considerably uncertain.
The Trend of Increasing Awards Continues
Two recent decisions of the Employment Relations Authority and Employment Court show a renewed willingness to provide increasing remedies under the Employment Relations Act 2000.
The first was a decision of the Employment Relations Authority, Andrews v Chief Executive of the Inland Revenue Department. Ms Andrews is a customer services officer for the Inland Revenue Department. She viewed information and tax information for a client’s partner (a “prominent New Zealander”) and made some comments about it to other employees. The Department decided to issue her with a written warning in relation to these actions. The Authority found that the Inland Revenue had not followed a fair process in issuing the warning, including that it did not sufficiently investigate whether Ms Andrews’ review of the client’s partner’s tax information was inconsistent with her normal work habits and practices.
The Authority ordered a retraction of the warning. It also found that Ms Andrews consequently suffered an emotional, mental and physical toll, including extreme bouts of depression, paranoia, insecurity and a sense of distrust and betrayal. It applied the now common bands when assessing compensation, and found the harm to fall within the mid-range band, warranting a remedy of NZD20,000 compensation for hurt and humiliation. Taking past practice into account, this was an unusually high award for a grievance not involving a dismissal and/or repeated poor behaviour on the part of an employer. It may demonstrate an increased willingness for the Authority to apply the bands and award higher compensation in arguably less serious situations.
The Employment Court has also since made some interesting comments about the Authority’s powers to award higher remedies than originally sought by an employee in Ashby v Niwa Vessel Management Ltd.
Ms Ashby was employed with Niwa on one of their major research vessels for 20 years. She was dismissed for incompatibility after many years of issues between her and NIWA, including complaints of bullying and sexual harassment. The Authority found the dismissal to be unjustified and awarded Ms Ashby NZD20,000 compensation for humiliation, loss of dignity and injury to feelings (the amount she had sought in the proceedings), as well as three months’ lost wages (although she had sought 12).
Ms Ashby challenged the determination in the Employment Court, seeking an uplift in her remedies. NIWA defended the challenge, claiming that the Authority’s compensation award was for the amount Ms Ashby sought, and that it was limited by that request.
The Court held that the Authority was not bound by the amount sought by a claimant when awarding remedies. The Court considered that the Authority differed from the Court, as an investigative body that is empowered to resolve employment relationship problems according to the substantial merits of the case without regard to technicalities. It has full agency over its own procedure provided it complies with natural justice and acts in accordance with equity and good conscience. There is no statutory requirement for applicants to specify the compensation sought and it is common for applicants to simply say they seek compensation without stating a quantum. Thus, it was open to the Authority to award more than the amount initially claimed.
The Court considered that the dismissal had a significant impact on Ms Ashby. She suffered severe distress and her long-term relationship broke down. In addition, whilst the sexual harassment and alleged bullying were not capable of compensation in the Employment Court proceedings, they rendered her vulnerable at the time of the dismissal, and thus impacted the extent of the distress caused. The Court considered that the appropriate award for Ms Ashby’s distress sat towards the top of the middle band, at NZD35,000. In determining lost wages, the Court also granted an uplift in the award of lost wages to 12 months.
The Court’s assessment confirms that the Authority can award more than that sought in the claimant’s proceedings. This is a significant shift, as the Authority had previously been acting as though bound by earlier case law and the common law principle that you cannot receive more than you seek. It was not uncommon for the Authority to comment that it would have awarded more compensation for an employee if more had been sought. In those cases, the Authority is now empowered to provide awards as it sees fit, irrespective of the employee’s claim.
This development by the Employment Court also suggests a trend towards increasing awards in general, which shall not be confined to the sum claimed by the employee. This represents somewhat of a warning for employers, who should be mindful of the increasing remedial awards and take this into account when responding to personal grievances.