Employers note - Changes ahead in New Zealand

Employment Update

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In this update, we signal the changes to employment laws in New Zealand taking place next month that employers need to be aware of. We also look at the new private members bill that might allow an employer to restrict its most senior employees from bringing a personal grievance.

Increase to minimum wage

On 1 April 2017, the adult minimum wage for employees over 16 years of age will increase by 50 cents to $15.75 per hour. The starting out and training minimum wage rates will also increase to $12.60 per hour.

Employers will need to ensure changes to payroll are made in advance of the deadline.

Updating individual employment agreements

The Employment Relations Amendment Act 2016 (Act) was introduced in New Zealand last year. The Act introduced changes which apply to all employers in New Zealand, strengthening the enforcement of employment standards, with the aim of promoting a fairer and more productive workplace for employers and employees.

For all employment agreements that were entered into after 1 April 2016, the changes set out below should already have been made (where relevant). For employment agreements that were entered into prior to 1 April 2016, these need to be updated by 1 April 2017 to reflect the changes introduced. The changes are:

  • Restrictions to zero hour contracts: If an employer provides a zero hour contract (where the employee is essentially on-call), they must now include an 'availability' provision in the agreement.
  • Secondary employment: Prohibitions on secondary employment have changed – there must now be express justification for such a restriction in the agreement.
  • Shift work cancellation: An employer can cancel a shift only with reasonable notice or compensation – this notice period and compensation rate must be specified in the agreement.
  • Hours of work: Any guaranteed agreed hours of work must be stated in the agreement – this may include start and finish times, days of the week on which work is to be performed, or the flexibility of the hours of work.

Other changes for 1 April that don't directly affect the drafting in employment agreements include:

  • Records: All employers must now keep records in sufficient detail to demonstrate that they have complied with minimum entitlement provisions.
  • Deductions: Employers must now consult with employees regarding deductions (unreasonable deductions are prohibited).

Contracting out of the right to raise a personal grievance

In December 2016, National MP Paul Goldsmith introduced the Employment Relations (Freedom of Contract for Higher Earners) Amendment Bill (Bill) – a private members bill. The Bill proposes that employees who are paid a salary in excess of NZ$150,000 should be able to contract out of the personal grievances provisions in the Employment Relations Act 2000 (Act). Currently, any employee, regardless of their salary, can raise a personal grievance if they believe their employer has acted unfairly or unreasonably towards them. The right to raise a personal grievance is restricted to certain claims, ie that the employee has been unjustifiably dismissed, unjustifiably disadvantaged, or discriminated against.

The logic behind the Bill is explained by Mr Goldsmith, "If someone is sufficiently skilled to command a salary of $150,000, he or she is not so vulnerable that they need to be protected even from their own contract. Well-paid CEOs are capable of bargaining for themselves." If the Bill becomes law, we will likely start to see terms being included in employment agreements that provide for damages payments to be made to senior employees in the event of a no-fault termination (often referred to as a 'golden handshake' or 'golden parachute'). These clauses are already making their way into some senior executive employment agreements in New Zealand but are largely untested by the courts. However, if an employee had contracted out of the right to bring a personal grievance such clause would almost certainly be upheld. Either way, the concept creates certainty for employers by removing the threat of a personal grievance with regard to its most senior employees.

Australia already automatically exempts a high-paid employee (earning in excess of AU$138,900) from being able to bring a personal grievance.

If you have any questions, or you would like to discuss the effect of any of the changes on your workplace or business, please contact one of our experts.