In 1973, the Third Labour Government brought in the Industrial Relations Act 1973.
In 1987, the Fourth Labour Government brought in the labor Relations Act 1987.
In 1991, the Fourth National Government brought in the Employment Contracts Act 1991 It was in force from 15 May 1991 to 2 October 2000 when it was repealed by the Fifth Labour Government and replaced with the ERA 2000.
The ICAA and IRA gave the most power to a government agency to force employers and employees to reach an agreement. The ECA gave the most freedom to employers and employees to reach agreement without government intervention. The LRA, the ERA 2000 and the ERAA 2004 lie in the middle of this spectrum.
The judges of the Employment Court are appointed by the Governor-General on the advice of the Attorney-General(section 200). The members of the Employment Relations Authority are appointed by the Governor-General on the advice of the Minister (section 167). The Mediation Service is run by the Department of labor.
However, The Armed Forces, Judges, the NZ SIS, and to some extent the Police are not covered. The ERA specifically includes homeworkers, for example, a person who buys material from a provider to make shirts at home and then sells the shirts back to the provider, and persons intending to work, that is, those who have accepted a job offer but not yet started working. It specifically excludes volunteers.
The ERA does not cover the relationship between principal and contractor or between contractor and sub-contractor. When the nature of the employment relationship is in doubt the Employment Court "must consider all relevant matters" pertaining to the nature of the relationship. (section 6(3) a).
The Employment Court may consider the following factors when deciding when a person is an employer or a contractor.
The Employment Court also recognizes that relationships can change over time. In Excel Corp Ltd v Carmichael (2003) , the worker started as a contractor but over time became an employee, whereupon he was covered by the ERA.
Note: In the USA the IRS considers someone to be an employee, and not a sub-contractor, for tax purposes if they: -Comply with employer's instructions about the work. -Receive training from or at the direction of the employer. -Provide services that are integrated into the business. -Provide services that must be rendered personally. -Hire, supervise and pay assistants for the employer. -Have a continuing working relationship with the employer. -Must follow set hours of work. -Work full-time for an employer. -Must do their work on the employer's premises. -Must submit regular reports to the employer. --Receive payments for business and traveling expenses. -Rely on the employer to furnish tools and materials. -Lack a major investment in facilities used to perform the service. -Cannot make a profit or loss from the services. -Work for one employer at a time. -Do not offer their services to the general public. -Can be fired by the employer. -May quit work anytime without incurring liability.
... based on the understanding that employment is a human relationship involving issues of mutual trust, confidence and fair dealing, and is not simply a contractual, economic exchange. This basis requires specific recognition of the relationship - something not satisfactorily achieved by general contract law.
In Williams v Dunedin City Ford (Unreported, Employment Relations Authority, Christchurch, 19 September 2007) the Employment Relations Authority decided that a female woker who had viewed 2 pornograhic images at work in three days, and complained about them to her supervisor, had not been provided with a safe and secure workplace“free of avoidable harm”, due to the employer's failure to deal with the second pornographic image. The employee was eventually dismissed after being absent from work on long-term sick leave. She was awarded $10,000 for lost salary and $7500 as compensation for distress.
If an employer does not provide a written employment agreement, the maximum fine is $5,000 for an individual or $10,000 for a company.
A good employment agreement should also have clauses covering the term of employment, protection of the employer's confidential information, leave (statutory and non-statutory), redundancy, termination of employment, serious misconduct, suspension, and where applicable, clauses covering probationary periods, targets and bonuses, and restraint of trade.
The Department of labor has an "Employment Agreement Builder" on its web page which allows anyone to make employment agreements that meet or exceed legal minimum standards.
Covert Surveillance of employees by employers does not breach the principle of good faith if it is done in accordance with the law.
Legislation allows employers to use cameras and other methods of surveillance without the knowledge of staff if there was reasonable suspicion that a crime was being committed, if the equipment was used for the specific purpose of investigating that crime and if the equipment is removed immediately after the crime had been solved.
In one case a sales rep was given a company car but wasn't achieving sales targets or satisfactorily accounting for his time so the employer covertly installed a GPS tracking device in his car to monitor his movements, and discovered that most of his days were spent at golf courses around Auckland.
The employee was dismissed and he challenged his sacking by appealing to the Privacy Commissioner, claiming the company had been underhand in installing a GPS device in his car without his knowledge. The commissioner upheld the employer's right to use it since the company had reasonable grounds to suspect that the employee was behaving dishonestly.
Most of the duties and obligations that fall on employees are not found in the ERA but in other statutes or in common law.
If an employee doesn't show up for work for 3 or 4 consecutive days and fails to inform his or her employer, then the employer is entilted to conclude that the employee has "abandon the employment". However, the employer should make an effort to contact the absent employee. Employment agreements often contain an abandonment clause.
The salary/wages for this position cover all time worked in meeting the performance requirements and the employee is not entitled to additional payment for time worked outside the normal hours specified. However, where a significant number of additional hours are worked, the employer will, if possible allow the employee to take time off in compensation for the additional hours worked.As a result, 20% of New Zealander's work more than 50 hours a week. An OECD study shows that New Zealander's now work some of the longest hours in the Western world - 1826 hours a year, compared with the OECD average of 1778. In response, the Flexible Working Arrangements Act was passed on November 21 2007. It aims to allow employees who are also caregivers to request more flexible working hours.
Employers may also try to prevent employees competing with them after the employee has left the company by including restraint of trade provisions in the employment agreement. However these provisions are only enforceable if a court decides they are reasonable in terms of the parties' interests and the public interest. In an unreported case in September 2007, the Employment Relations Authority decided that a clause that prevented a hair stylist from soliciting or dealing with any customers from his old workplace for 3 months after he had left his old workplace, was reasonable. The stylist's new workplace was 50 meters from the old one.
Employers can unilaterally introduce drug testing in the workplaace if it is "reasonable" and the employer should consult with employees before introducing the policy. Two useful cases on drug testing in the NZ workplace are NZ Amalgamated Engineering and Manufacturing Union v Air New Zealand Ltd and MUNZ and Ors v TLNZ and Anor.
In NZAE&MU v AirNZ the Employment Court said that employees engaged in "safety-sensitive" areas, such as flying planes, could be drug tested. In MUNZ and Ors v TLNZ and Anor the Employment Court said the drug testing policy must be "reasonable in all the circumstances".
A serious breach of any one of the duties by the employee allows the employer to fire the employee. A breach of these duties by the employer that causes the employee to resign allows the employee to sue for constructive dismissal.
Good reasons for firing employees include :
In all of these situations the seriousness of the "bad behaviour" is crucial. The termination must also be procedural fair. A procedure that does not follow the principles of natural justice is unlikely to be held to be fair. The leading case on procedural fairness is NZ Food Processing, IUOW v Unilever.
A dismissal following poor or unfair procedure will not necessary result in the Court finding that the dismissal was unjustified if the conduct was bad enough, but may result in the employee being awarded monetary compensation. Section 103A of the ERA states that the dismissal must be "fair and reasonable" under the circumstances. In 2006 a woman was sacked for forwarding an email containing pictures of naked people but the ERA awarded her $9000 for unjustified dismissal.
(See 7.1 Unjustifiable Dismissal below for further discussion)
In 2005 Donna Maree Tauhore assaulted a colleague and was dismissed and prosecuted for assault. She was acquitted of assault in the District Court but the Employment Relations Authority rejected her claim of unjustified dismissal saying that based on the information available at the time, the employer's decision to sack her was reasonable.:
The employee's resignation also needs to be caused by the breach of duty on the part of the employer and the breach has to serious enough to make it reasonable foreseeable that there was a substantial risk of resignation.
Claims of constructive dismissal are not simple and are relatively difficult to prove in court. Many claims of constructive dismissal arise when an employer changes the working conditions to the employees disadvantage, e.g. more responsibility but no more pay. The employee quits and then tries to claim constructive dismissal. However, under section 103(1)b of the ERA, the employee is only entitled to pursue a personal grievance claim when "1 or more conditions ... are ... affected to the employee's disadvantage by some unjustified action by the employer".
In a case from April 2006, the Employment Relations Authority awarded a woman $6000 for constructive dismissal when she felt she had no choice to resign because she could no longer trust her company's managing director, who broke a promise not to disclose her name to a "very unstable" colleague that she had reported for making threats, and because she felt unsafe at the company.
Section 69A of the ERA gives some protection from redundancy in some situations to employees listed in Schedule 1 of the ERA, that is, cleaners, caterers, orderlies and caretakers.
When an "employee is, or will be, no longer required by his or her employer to perform the work, or part of the work, performed by the employee" (section 69C) an employee may be made redundant. Not only does an employer need genuine business reasons for a redundancy they must follow a fair procedure.
Based on case law, fair procedure includes:
If a redundancy was not fair an employee may bring a personal grievance for unjustified dismissal.:
Would a reasonable person, taking into account the nature, terms and conditions of the new position consider there was sufficient difference between the former role and the alternative role offered by the employer?Some factors that are compared to determine whether a new role is "substantially similar" to an old one are:
†NB the Act itself says "fourth" and "seventh" respectively, but what ever was "third" has been repealed.
may pursue a personal grievance. In addition whistle blowers are protected under the Protected Disclosures Act 2000.
Section 112 of the ERA states that when an employee can choose to bring an action under the ERA or the Human Rights Act 1993 the employee can not bring an action under both acts. Section 114 of the ERA states that a personal grievance must be raised with the employer within 90 days.
The Personal Grievance provisions of the ERA are now the only way for an employee to challenge a dismissal (section 113). Employees no longer have the right to sue under the common law in the Courts.
There was no definition of "unjustifiably dismissed" in the original ERA but in 2004, section 103A "Test of Justification" which applies to claims for unjustifiable dismissal or unjustifiable disadvantage, was added to the Act,
The question of whether a dismissal or an action was justifiable must be determined, on an objective basis, by considering whether the employer's actions, and how the employer acted, were what a fair and reasonable employer would have done in all the circumstances at the time the dismissal or action occurred.
The employer must show that a dismissal was justified substantially and procedurally.
The leading case on procedural fairness is IUOW v Unilever NZ. It says that the employee must be given;
These are the minimum standards but a more comprehensive procedure may be required depending on the facts of the case. In Trotter v Telecom NZ : the court said that in the case of dismissal for poor work performance:
Warnings for poor work performance should be explicit and fair. They should describe how an employee's behaviour is deemed to be unsatisfactory, give clear information about what improvements will meet the employer's requirements, and how improvement will be measured.
However judges have recognized that most employers will not be able to provide perfectly fair procedures for dismissing employees. In BP Oil v NDU : the Court of Appeal said:
The question is essentially what it was open to a reasonable and fair employer to do in the circumstances.
In IUOW v Unilever NZ the court also said:
...the employer's conduct of the disciplinary processes is not to be put under a microscope and subjected to pedantic scrutiny.
This means that minor procedural inadequacies should not render a disciplinary action unjustified. For a detailed example see Pixie Eruera Morrison v New Zealand Post (discussed in Investigating misconduct : a delicate tea ceremony? see external links). In this case the Employment Court found that NZ Post's investigation was not up to standard but the employees misconduct was serious enough to justify the employees dismissal.
However Tony Skelton, managing director and CEO of ACE Training, believes that small to medium-sized employers find it so difficult to comply with the requirements of the ERA 2000 that they pay one to three months salary to underperforming employees to leave rather than dismiss them through the process outlined under the Act.
If we as business owners don't follow the process correctly, irrespective of the reasons and the legitimacy of a disciplinary action, we are in default of the Act and we are going to get done for it. From a small businesses owner's point of view, the business has absolutely no protection whatsoever. It's a completely lopsided, unbalanced piece of legislation. It takes three months to go through the process and, if you slip up on one point, the Employment Court says you've stuffed up.
"...all the circumstances" in section 103A could include the size and resources of the organization. A large organization with an Human Resources department could do a better investigation than a small business. A large organization could also afford to suspend an employee on full pay while the investigation is carried out. The NZ Police suspended Clint Rickards on full pay from February 2004 until Nopvember 2007, when Rickards resigned.
An example of a procedurally fair process is as follows:
1 The employer conducts a proper investigation into the alleged wrongdoing.
2 The employer invites the employee to a disciplinary meeting. The employee should be told:
3 At the meeting, the employer should properly explain their information and give the employee a chance to respond to it and present their own information.
4 After the meeting, the employer should properly consider all the information with an open mind and inform the worker of the decision.
Under The Employment Relations Act probationary periods do not affect the application of the law relating to unjustifiable dismissal. Even if an employee agrees to enter into an employment agreement that is subject to a probationary period or trial period, the employer must ensure that any dismissal is carried out in a procedurally fair manner and is substantively justified.
...In other words you cannot just let the probationary period expire and then give the employee notice. You will leave yourself vulnerable to a personal grievance action based on unjustifiable dismissal if you do not follow a fair process.
...you should ... set up a meeting with the employee and at this meeting tell him precisely where he is under performing and exactly what he needs to do to improve. Allow him to comment on this and encourage him to put forward any concerns he may have about e.g. his role, the way he is being supervised etc. If any further training is required then identify this with the employee at this meeting. At the same time you should make it clear to the employee that his employment is in jeopardy if he does not improve.
This way the employee will become aware that he needs to improve and focus rather than being blissfully unaware that he is under performing. ... You should also extend the probationary period to give the employee an opportunity to improve. If after the extended probationary period the employee has still not improved you have the option of dismissing him.
Steve Punter, managing director of Staff Training Associates, gives the following advice to new employees :
What the new employee needs to know is that, if there is a probationary period, then it must be written in the contract of employment - it cannot be done verbally. Also in the agreement - or in some other document linked to it - has to be what the employer will do if the new person doesn't work out in the new job... the whole process has to be transparent, upfront and documented so the employee knows exactly where they stand. [N]ew starters need to demonstrate they can do the job they have been hired for. Or there could be grounds for dismissal. If someone is having trouble in their new job then they have to tell their employer or manager as soon as possible. People should not be frightened of revealing that they are having difficulty. And the reason for this is that the employer has a legal obligation to do their best for their employee. ... Employers [should] meet their new employee at the end of the first week in the new job and, if there are any issues, then they should be raised as soon as possible - not on the day the employer decides they want to dismiss them. Issues have to be addressed as they become apparent. All staff are entitled to warnings, performance counselling and to have access to advice.
Employees, who wish to do something about a reduction in the terms of their employment as a result of an unjustifiable action by their employer, may file a personal grievance for disadvantage under section 103(1)b of the ERA. Usually, employees who are still working for their employer file a personal grievance for disadvantage. Employees who have been fired or who have quit, would file a personal grievance for unjustified dismissal or constructive dismissal, respectively.
Conditions of Employment that are covered by a collective agreement or an individual employment agreement cannot be unilaterally varied in a substantial way by an employer unless there is a clause in the agreement to this effect. Minor variations that do not make the role "substantially different" are permissible.
Therefore claims of unjustified disadvantage usually arise from conditions of employment that are outside a collective agreement or a contract of employment. Examples are:
Section 103A, the "Test of Justification" also applies to disadvantage, so the employer must show that their action was justified substantially and procedurally.
Section 104 states that direct or indirect discrimination against employees on the 13 grounds set out in section 21(1) of the Human Rights Act 1993 is unlawful. Section 105 lists these grounds, namely:
Section 104 also adds 2 more prohibited grounds for discrimination to this list and they are:
Section 106 states that the "exceptions in relation to discrimination" in the Human Rights Act 1993 also apply to employment. For example, a church is entitled to discriminate against members of a different religion when advertising for a minister.
Section 108 prohibits direct or indirect sexual harassment by an employer where the harassment has a detrimental effect on the employee's employment, job performance, or job satisfaction. Section 117 prohibits sexual harassment by co-workers or customers.
Section 109 prohibits racial harassment by an employer where the harassment has a detrimental effect on the employee's employment, job performance, or job satisfaction. Section 117 prohibits racial harassment by co-workers or customers.
Section 110 prohibits employers from discriminating against employees for their involvement (or non-involvement) in a union or other employees organisation.
The primary remedy when the employee has a personal grievance is reinstatement. (section 125) Other remedies include:
The Employment Relations Authority may also order interim reinstatement pending the hearing of the personal grievance (section 127). If the employee has contributed to the situation that gave rise to the personal grievance then the remedies may be reduced (section 124).
The amount of compensation for humiliation, loss of dignity, injury to feelings, etc. is at the discretion of the Authority and the Court and while there is no set maximum, there are indications that $27,000 is the upper limit. However, most amounts are well below this. Under the old ACC scheme, which was abolished in 1992, the maximum payout for personal injury was also $27,000.
Employees who are union members can ask the union to help them and legal costs will be low. However, cheap lawyers charge at least $150 per hour and large city firms $300-$450 per hour. It costs at least $200 to get a lawyer to file a notice of grievance. A day long mediation at the Department of Labor costs about $3000 in legal fees and to file a case with the Employment Relations Authority also costs about $3000 in legal fees. The average payout is between $2000 and $4000 Not surprisingly, 95% of cases do not go past mediation.
The ERA acknowledges that there is an "inherent inequality of power in employment relationships" and promotes collective bargaining (Section 3) as a way of evening up the power disparity between employers and employees. It also "recognise(s) the role of unions in promoting their members' collective employment interests". (section 12)
All parties, that is employers, employees and unions in an employment relationship must act in good faith (section 4,2). Section 32 outlines the minimum things that unions and employers must do when bargaining for a collective agreement. They are:
Section 33 states that the duty of good faith requires the parties to conclude a collective agreement unless there is a genuine reason, based on reasonable grounds, not to.
The following are classic examples of not bargaining in good faith.
The penalty for a breach of good faith is $5000 for an individual and $10,000 for a company (section 135). In November 2007 the Employment Relations Authority found that Air NZ had breached its good faith obligations to the Service and Food Workers' Union (SFWU) by sending letters to 269 employees it believed to be members of the SFWU trying to entice them to members to leave the union. Air NZ may be fined up to $2.69 million (decision pending).
Workers may strike only in relation to bargaining for a new collective agreement (section 86) or "on grounds of health and safety"(section 84). Workers must wait for the old collective agreement to expire before they go on strike. As collective bargaining can only be undertaken by a union, only union members can go on strike. One person cannot go on strike, only a "number of employees" can do so. (section 81) Sympathy strikes, Strikes for political purposes, such as human rights in other countries, and General Strikes are all unlawful.
As with stikes, employers may only lockout workers in relation to bargaining for a new collective agreement (section 86) or "on grounds of health and safety"(section 84). In contrast with a strike, one worker may be locked out.
Section 15 states that The Registrar of Unions, who is an employee of the Department of Labour, must register a society as a union if they apply and meets the citeria set out in section 14. A union can only be deregistered if the union asks for it or the Employment Relations Authority determines that the union no longer meets the criteria in section 14.
Access : Section 20 gives union representatives the right to enter a workplace for purposes related to the employment of its members or to the union's business.
Purposes related to the employment of its members include:
Purposes related to the union's business include:
Meetings : An employer must also allow union members they employ to attend 2 paid union meetings of 2 hours duration every year. The union must give 14 days notice (section 26).
In order to deal with the freeloading problem, Section 59 of the ERA makes it a breach of good faith for employers to "pass on" terms and conditions that unions have negotiated for their members to non-members if the purpose of doing so is to undermine collective bargaining or collective agreements.
Under section 69, if the union, the employer, and the non-member employees at a work place all agree, then the employer may "pass on" terms and conditions to non-member employees in exchange for those employees paying a bargaining fee to the union that negotiated the agreement. The non-member employees must agree by secret ballot.