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New Employment Standards Bill will make sweeping changes – some controversial

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New Employment Standards Bill will make sweeping changes – some controversial

John Hannan, Partner at DLA Piper Auckland, shares some insight into the new Employment Standards Legislation Bill.

The Employment Standards Legislation Bill (Bill) has the stated aim of promoting fairer and more productive workplaces for both employers and employees.

There are three noteworthy categories of changes proposed in the Bill.

The Bill will make amendments to the Parental Leave and Employment Protection Act 1987 that increase flexibility, extend eligibility for paid parental leave, change the threshold test and introduce ‘keeping in touch days’ for the employee.

It will prohibit what are deemed to be unfair employment practices, including controversial ‘zero hours’ contracts.

It will increase record-keeping obligations; employers will have to maintain records showing that they have provided minimum entitlements. There will be significant penalties for failure to keep such records.

The Bill will also provide enhanced remedies (and penalties) where minimum entitlements are not provided. This includes remedies against managers and others involved in such breaches, not just against the actual employer

Changes to parental leave – increased coverage, greater flexibility, extended rights to paid parental leave

The Bill amends the Parental Leave and Employment Protection Act 1987. The most significant of the proposed changes include:

  • New definitions of ’employee’ and ‘self-employed person’ will extend paid parental leave to include non-standard workers (for example, seasonal workers) and employees who have recently changed or left jobs. Self-employed persons who have recently ceased to be self-employed will now be eligible for paid parental leave
  • ‘Maternity leave’ will be changed to ‘primary carer leave’. This will extend parental leave entitlements, beyond those who give birth to or adopt a child, to persons who become the primary caregiver for the day-to-day care of a child up to the age of five.
  • These new definitions expand eligibility under the proposed Bill, making parental leave more accessible and reflective of modern family situations.
  • The introduction of a new type of leave for employees who are caregivers but are not eligible for primary carer leave. Employees not entitled to primary carer leave will be able to request a period of leave from their employer to allow them to receive parental leave payments. Employers will be obliged to consider requests, but may decline requests for ‘detriment’ reasons.
  • The thresholds for parental leave entitlements will be amended by introducing ‘6-month’ and ’12-month’ qualifying period tests. Primary carers, or the spouse/partner of the primary carer if they are responsible for caring for the child, will qualify for extended leave of 26 weeks if they meet the 6-month test or 52 weeks if they meet the 12 month test.
  • Employers and employees will be able to agree to ‘keeping in touch days’ without the employee losing rights to paid parental leave. ‘Keeping in touch days’ will allow employees to work for up to 40 paid hours during their period of parental leave without being considered to have returned to work. This in turn allows them to retain paid parental leave and other entitlements. Both parties must agree to the ‘keeping in touch days’.

Stopping unfair and exploitative employment practices

The Bill addresses other employment practices considered to be unfair, particularly around controversial ‘zero-hours’ contracts.

The significant proposed changes include:

  • A prohibition on employers making deductions from an employee’s pay, where the deduction is unreasonable, regardless of whether or not the employee consented. ‘Unreasonableness’ is not defined and we expect further clarity on this once the Bill has gone through Select Committee.
  • ‘Zero hours’ employment agreements are specifically addressed. These are employment agreements with no standard hours of work, where the employee must make themselves available for work on request yet the employer is not obliged to provide work. The Bill terms this an ‘availability provision’. An ‘availability provision’ will only be enforceable if the employer pays ‘compensation’ to the employee for making themselves available. And if no compensation is payable the employer cannot take adverse steps against an employee who declines an offer of work. The ‘availability provision’ may apply either to all work performed under an employment agreement or only to overtime. This part of the Bill has already attracted adverse comment from Union submitters to Select Committee, who argue that far from outlawing ‘zero hours’ agreements the Bill enables them, and does not specify what ‘compensation’ has to be provided
  • A new requirement that shift workers’ employment agreements set out the notice period for an employer to cancel a shift and, if the notice cannot be provided, the amount of compensation available to the employee. The notice must be reasonable. As there is no minimum level of ‘compensation’ payment required, we expect this will be a matter on which the Select Committee may provide further guidance.
  • Restrictions on the ability of employers to prohibit secondary employment. An employment agreement must not prohibit the employee from being employed in a second job unless there is a genuine reason based on reasonable grounds. The specific ‘genuine’ reason would need to be specified in the employment agreement. The Bill sets out a non-exhaustive list of what constitutes a ‘genuine reason on reasonable grounds’, including protecting confidentiality and intellectual property, and avoiding a conflict of interest.

Tough new increased penalties and enforcement of employment standards

In addition to existing enforcement powers under current employment legislation, the Bill will increase the reach and extent of enforcement powers for breaches of a number of important minimum terms and conditions and safeguards for employees, referred to as ’employment standards’ and ‘minimum entitlement provisions’. These include minimum wages, minimum leave provisions under the Holidays Act 2003, rest breaks, and the requirement that employment agreements be in writing.

The significant proposed changes include:

  • A requirement that all employers keep records that establish compliance with minimum employment entitlement provisions. The new requirement will be in addition to existing record‑keeping requirements (for example, leave records). Those who breach this obligation can be prosecuted in the District Court or issued (by a Labour Inspector) with an infringement notice imposing a fee of $1,000.
  • Labour Inspectors will be able to enforce minimum entitlements by declaring that a ‘serious breach’ of minimum entitlements has occurred. If a Labour Inspector makes a declaration that a ‘serious breach’ has occurred, they can seek additional orders, including:
    • An order banning an employer or any person involved in a breach of a minimum entitlement provision from entering into employment agreements, being an officer of an employer, or being involved in the hiring or the employment of employees for a specified period of time (up to 10 years).
    • An order that a person other than the actual employer pay compensation to the person who suffered the breach, if the employer cannot pay. This provision is intended to strike at shareholders, directors or senior officers of companies who are involved in breaches of minimum employment entitlements but are wound up or otherwise don’t pay what they owe employees.
    • An order allowing for a pecuniary penalty of up to $50,000 for an individual or the greater of $100,000, or three times the financial gain made by the breach, for a company.
  • It will be unlawful to provide insurance against these penalties. However, the Bill allows insurance where the breach was due to another person’s action or where the breach was in reasonable reliance on information provided to the employer.

What happens next?

The Bill must now complete the Select Committee process. The Select Committee’s report is due 12 February 2016.