practice area articles
By Michael Quigg
Back to International Employment Law
KEY DEVELOPMENTS FOR 2020
Triangular employment relationships
The Employment Relations (Triangular Employment) Amendment Act 2019 has now come into force. This Amendment Act makes 'controlling third parties' ("CTP"), such as employers that make use of temps or other temporary staff, potentially subject to personal grievance claims. A CTP is a person who has a contract or arrangement with an employer under which an employee performs work for the CTP's benefit, and the CTP exercises (or is entitled to exercise) control or direction over the employee in a way that is similar to the control or direction an employer exercises over an employee.
As a result of the upcoming changes, either the employee or the employer (e.g., the labour hire provider) can join the CTP to a personal grievance once raised by the employee if they consider the actions of the CTP caused or contributed to the personal grievance. The employee and employer may also apply to join the CTP to proceedings in the Employment Relations Authority or Court. If it is determined that the employee has a personal grievance, the CTP may be required to contribute to any remedies awarded in a way that reflects the extent of the CTP's contribution to the personal grievance.
These amendments are a significant change to the longstanding restriction in the Employment Relations Act 2000 that an employee could only bring a personal grievance against their employer which may undermine the appeal of labour-hire arrangements.
Independent contractors found to be employees
In two recent decisions, the Employment Court has declared individuals to be employees in industries where the practice is typically that individuals work as independent contractors.
The two cases concerned a courier driver who had signed an independent contractor agreement, and four taxi drivers with no written agreement. In both cases, the Court found the drivers to be employees as their respective employers exerted a high level of control over them, and they were not in business of their own account. The industry practice of engaging courier/taxi drivers as independent contractors was not a useful indicator of their status; it was the real nature of the relationship that mattered. This is a change in direction from a longstanding Court of Appeal decision which established that a courier driver was not an employee. There may be an increase in challenges to employment status in light of these decisions. As such, businesses should scrutinise and review their use of independent contractors and ensure the real nature of the relationship is not akin to an employment arrangement.
Discretionary bonus to be included in holiday pay calculations
The Employment Court has taken a narrow approach to the meaning of 'discretionary payments' in the Holidays Act 2003. The Court found that an employer's discretionary bonus scheme, which provided payments to incentivise productivity, came within the meaning of 'gross earnings' in the Holidays Act 2003. Discretionary payments are excluded from the definition of 'gross earnings'. However, the Court stated this only applied to 'truly discretionary payments', such as a Christmas bonus. As the discretionary bonus payments were gross earnings, they needed to be taken into account when calculating pay for holidays and leave.
Unless an employer spontaneously awards employees a bonus, any documented incentive arrangement is likely to be caught by this decision. Many employers offer 'discretionary' incentive schemes and, thinking themselves to be operating within the Holidays Act 2003, exclude these 'discretionary' incentive payments made from gross earnings calculations. Based on this decision, employers who have done so may have underpaid employees' holiday pay. This could amount to significant underpayments where incentive schemes have operated for a long period of time.
KEY DEVELOPMENTS FOR 2019
Employment Relations Amendment Act 2018
One of the final acts in the Government’s 100-day plan was the introduction of the Employment Relations Amendment Act (“Act”). The Act aims to tilt the balance of New Zealand’s labour law landscape in favour of employees and unions. The changes proposed in the Act are some of the most significant to have been made to New Zealand employment law and include:
- a restriction on the use of a 90 day trial period to employers with 19 or less employees;
- strengthening the union’s power and presence in the collective bargaining process and employers being required to conclude collective bargaining unless there is a genuine reason not to;
- the Employment Relations Authority will be required to order reinstatement wherever practicable and reasonable; and
- having prescribed times for rest and meal breaks.
The Act was passed by Parliament on 5 December 2018 and many of the changes will take effect in two stages on the day after Royal assent (12 December 2018) and on 6 May 2019.
The Equal Pay Amendment Bill
The Equal Pay Amendment Bill is currently with Parliament. In its current form (which may be subject to amendments) the Bill provides the right for employees to make claims if they believe they are being underpaid due to their roles being undervalued. Employees can use the bargaining process to resolve their claims or bring litigation if claims are not settled. The courts will have the power to award back pay on claims for a period of up to 6 years.
The Privacy Bill
A Privacy Bill is currently before Parliament. The Bill proposes 4 key changes to increase data protection and enforcement powers of the Privacy Commissioner. The 4 proposed key changes are:
- breach reporting requirement: if a person’s privacy rights are breached and there is a possibility of serious risk and harm the agency which holds the data will be required to notify the Privacy Commissioner and the individual as soon as practicable. Failure to do so may result in a fine of up to NZD 10,000;
- enhanced powers for the Privacy Commissioner: the Privacy Commissioner will have two new powers. Firstly, the power to issue compliance notices requiring agencies to take specific steps to comply with their legal obligations; and secondly, the Privacy Commissioner can issue binding decisions on personal information requests;
- transfer of data overseas: the transfer of data overseas will only be permitted if that jurisdiction has comparable privacy laws to New Zealand or the data subject provides consent; and
- offences: it will be an offence for someone to falsely represent that he or she has authority under the Privacy Act or to knowingly destroy documents that are subject to a personal information request. A maximum fine of NZD 10,000 has been proposed.
KEY DEVELOPMENTS FOR 2018
Important Legislative Developments
In October 2017, a new coalition Government led by the Labour Party was sworn in. The new Government signaled that it intends to make some significant changes to employment law. The following changes have been confirmed:
- the minimum wage is to increase to $16.50 an hour on 1 April 2018. The Government has stated that the minimum wage will increase to $20 an hour by 2020; and
- paid parental leave is to increase to 22 weeks for parents with babies due on or after 1 July 2018. This will progressively increase to 26 weeks by July 2020.
A number of other changes are also proposed, these include:
- removing the trial period provisions introduced by the National-led Government in 2009. These provisions allow employers to dismiss employees without justifiable cause within the first 90 days of employment. A new trial period regime will be introduced that allows such employees to have recourse to a referee service which will hear these disputes;
- introducing Fair Pay Agreements (FPAs). FPAs are designed to set basic standards of pay and other conditions within an industry including allowances, weekend/night rates and leave entitlements; and
- introducing statutory support and legal rights for “dependent contractors”.
In response to increased public scrutiny of “zero-hour” contracts, the Government introduced legislation to prohibit these arrangements and a number of new prescriptive requirements for employment agreements. Employers need to ensure that any existing or new employment agreements comply with these requirements.
Awards for Humiliation, Loss of Dignity and Injury to Feelings
There have been several recent Employment Court cases where the Court has raised concerns as to the extent to which compensatory adequately reflect the non-pecuniary loss or damage sustained by an employee. The Court has noted there has been a “discernible upswing” in the quantum of awards for humiliation, loss of dignity and injury to feelings. It is likely that this “upswing” in awards will continue until the Court is comfortable that these awards have “caught up” and are more aligned with those sums which have been awarded by the Human Rights Review Tribunal, where employees who have been subjected to discrimination can instead choose to bring their claims.