New Zealand Select Committee on the Employment Standards Bill
New Zealand Parliament’s Transport and Industrial Relations Select Committee issued its report on the Employment Standards Legislation Bill on 12 February 2016. The intent of the Bill is to “make workplaces fairer and more productive for both employees and employers” in three respects:
- Prohibiting certain “unfair employment practices”, being the so-called ‘zero hour contracts’.
- Expanding eligibility for parental leave and increasing flexibility of the parental leave scheme.
- Enhancing the enforcement of minimum employment obligations.
The Select Committee received 12,260 submissions on the Bill and recommended many amendments.
The Bill may be subject to further changes before it is passed into law. It is likely that the Bill will be passed into law later this year. Based on what is currently known, the following changes would apply:
‘Zero Hour’ Contracts
The majority of the submissions made to the Select Committee related to zero hour contracts. These are contracts that do not guarantee any hours, but require employees to be available should they be offered work. Such arrangements are also referred to as availability provisions.
The Bill as originally drafted stated that unless the relevant employment agreement provides for compensation, an availability provision would be unenforceable and an employee would be entitled to refuse work. The Select Committee received many submissions on this topic, many arguing that the Bill still allows for zero hour contracts.
The majority of the Select Committee concluded that availability provisions should not be banned as there are situations where they benefit both employer and employee. The Select Committee recommended amending the Bill to require “genuine reasons based on reasonable grounds” for including an availability provision in an employment agreement. A non-exhaustive list of factors that may be considered when determining whether an availability provision is reasonable has been inserted. These include whether it is practicable for the needs of the business to be met without an availability provision and the number of hours the employee is expected to be available for as a proportion of their total agreed hours of work.
The reported back Bill retains the requirement for reasonable compensation for availability provisions. Factors to be taken into account when determining whether compensation is reasonable include the number of hours the employee is expected to be available for and the level of restriction imposed on them. The Select Committee inserted a provision allowing employees to refuse to perform work in addition to any guaranteed hours under their employment agreement if the employment agreement does not also provide for reasonable compensation.
Other Unfair Employment Practices
The Bill provides for the payment of compensation where a shift is cancelled without a specified period of notice, which must be set out in the employment agreement. The Select Committee has inserted guidance as to what level of compensation will be considered reasonable.
The Bill seeks to prevent employers imposing unjust limitations on employees’ secondary employment. The Select Committee has recommended amending the Bill to ensure it is clear that a secondary employment restriction provision must not be included in an employment agreement unless the employer has “genuine reasons based on reasonable grounds” for including the provision, and these reasons are stated in the employment agreement. Any restrictions on secondary employment must be the “minimum necessary” and if a secondary employment provision is aimed at preventing a conflict of interest, this may only be used “if necessary to manage” the conflict.
The Bill seeks to limit an employer’s ability to make “unreasonable” deductions from an employee’s wages. The Select Committee recommended amending the Bill such that a general deductions clause in an employment agreement counts as the employee’s written consent, but that consultation must occur before any deduction is made.
The Bill seeks to amend current parental leave entitlements, by extending parental leave and payment entitlements to non-standard workers and increasing flexibility of the parental leave scheme. The Select Committee recommended the following key changes to the Bill:
- Amending the new proposed term “primary carer” to be defined as someone who takes “permanent primary responsibility for the care, development and upbringing” of a child. This is intended to better reflect the intention to extend entitlements only to those with permanent responsibility and not daily care minders.
- Supporting the proposal to provide additional parental leave payments for primary carers of premature babies, the Bill has been amended to allow primary carers one week of payment for each week that their child is born prematurely (up to a maximum of 13 weeks). This will not affect a primary carer’s entitlement to regular parental leave payment.
- The Bill proposed Keeping-in-touch (KIT) hours, which would allow primary carers to stay in touch with their workplace during parental leave without losing their parental leave entitlements. The Select Committee recommended amending the KIT hours provision to ensure there was no ambiguity about when KIT hours could be used. KIT hours are available during an employee’s parental leave ‘payment period’, and not during the unpaid extended leave period.
- Originally, primary carers would not be able to use KIT hours during the first 28 days of the baby’s life. The Select Committee recommended exempting those receiving preterm baby payments to recognise that if a baby is preterm, a person may not have time to complete a handover. This would give people flexibility before going on leave.
- The Bill proposed allowing employees to take their extended leave entitlements over more than one period to ensure flexibility in how people wish to take parental leave. Submitters raised concerns that this may mean uncertainty for employers as to when employees would be taking extended leave. The Select Committee proposed amending this section to clarify that employees and employers must reach mutual agreement about the dates of extended leave.
Enhancing Compliance with Employment Standards
The Bill seeks to impose stricter rules and penalties regarding compliance with employment standards. This includes increasing the power of Labour Inspectors to enforce minimum employment standards and enhancing accountability where third parties are involved in breaches.
The Bill imposes a strict obligation upon employers to keep detailed records demonstrating their compliance with minimum employment requirements. There were concerns raised about the burden upon employers if the employees are salaried because there can be considerable fluctuations in hours of work. The Select Committee did not agree with excluding salaried employees from this provision, but recommended adding a new subsection to ensure flexibility. This specifies that if an employee works their ‘usual hours’ and this is recorded in a wage and time record, employment agreement or in a roster (or similar document), the recording obligation is met. An employee’s usual hours would include any “reasonable additional hours” worked under the employment agreement.
The Bill allows Labour Inspectors to apply for compensation orders where a breach of minimum standards has resulted in an employee suffering loss or damage. The Select Committee recommended amending the Bill to allow employees to also apply for compensation orders.