112 – Workplace Law Newsletter

In this edition:

What the new government means for employment law

The new Government has moved quickly to implement changes to workplace laws and industrial relations during its first few weeks in office. The new Prime Minister – Jacinda Ardern, Minister of Workplace Relations and Safety – Iain Lees-Galloway, and Minister for Women – Julie Anne Genter have made it clear that these are the first of a significant raft of changes likely for employment law in New Zealand.

Although it is clear that employment law is set to receive a shake up from the Labour-led government, surprisingly few details have been revealed about how, and what, these changes may entail. This article summarises our understanding of what has happened so far, and what may come in the not so distant future.

What do we know?

Agreements with NZ First and the Green Party

During the election campaign Labour, New Zealand First and the Green Party had a number of common intentions relating to employment laws. The Parties’ common intentions are reflected by the lack of employment related policies contained within Labour’s Coalition Agreement with New Zealand First, and Confidence and Supply Agreement with the Green Party.

Given that the policies of Labour and the Green Party are generally aligned in this area, it is not surprising that the Agreement with the Green Party is light on employment related priorities. However, the Agreement does specifically include as a priority to eliminate the gender pay gap within the core public sector with substantial progress within this Parliamentary term, and work to ensure the wider public and private sectors are on a similar pathway. The Agreement also appointed Green Party Member Julie Anne Genter as the Minister for Women. Julie Anne has made it clear in recent weeks that Pay Equality is on her radar, with significant developments to come in the area.

The Coalition Agreement with NZ First identified some employment priorities to progress during this Parliamentary term. Firstly, minimum wage is to be progressively increased to $20 per hour by 2020, with the final increase to take effect in April 2021. Increasing minimum wage was also Labour’s policy, and the Prime Minister has already announced that minimum wage is set to increase to $16.50 on 1 April 2018. Secondly, unemployment is a focus of NZ First, who want the official measures for unemployment to be reviewed to ensure they accurately reflect the modern workforce. NZ First also prioritise implementing initiatives and programmes to get youth and long term unemployed back into the workforce.

Labour’s Policies

As Labour Party Member Iain Lees-Galloway has been appointed Minister for Workplace Relations and Safety, it is clear that Labour will be driving any changes to employment law. Significant features of Labour’s election policies include:

  • Replacing 90 day trial periods.
  • Restore reinstatement as the primary remedy for unjustified dismissals.
  • Double the amount of Labour Inspectors.
  • Increase parental leave to 26 weeks.
  • Develop legislation to allow for industry wide collective bargaining.
  • Restore rights of unions and workers in relation to bargaining.
  • Repeal the law preventing film workers to bargain collectively.

We have already seen the Government take steps to implement some of these policies.

What has happened so far?

During the new Government’s first weeks, employment has received some spotlight.

The Parental Leave and Employment Protection Amendment Bill was introduced under urgency on 8 November 2017 to extend paid parental leave to 26 weeks by 2020. The increase is proposed to be phased in over two stages, increasing to 22 weeks from 1 July 2018 and the final increase to 26 weeks on 1 July 2020.

Although introducing the Parental Leave Bill appears to be the only formal step taken at this stage, a number of significant announcements have been made.

The new Government has announced its commitment to halting the Employment (Pay Equity and Equal Pay) Bill. The Bill was introduced by the previous Government and was heavily criticised by Labour, NZ First and the Green Party for diminishing the opportunity for people to make pay equity claims. The Government has announced it will be progressing work on new legislation which adheres to all the principles of the Joint Working Group on Pay Equity.

The Government also announced its intention to collaborate with the film industry to develop a framework for workplace relations within the sector, including restoring the right for film and television workers to bargain collectively.

In her speech to the CTU Conference the Prime Minister reiterated the Government’s intentions to make changes, including:

  • Restoring the right to rest and meal breaks.
  • Restoring the duty to conclude bargaining
  • Restoring the right of union access to members at their workplace.
  • Removing the ability of employers to deduct pay for work to rule and other low level protest action.
  • Tightening the rules on passing on
  • Restoring the right of workers to initiative collective bargaining.

During this speech, the Prime Minister revisited the introduction of Fair Pay Agreements (FPAs) to “end the race to the bottom on wages”. As discussed below, FPAs, when introduced, are likely to be a significant change to workplace relations in New Zealand.

What might come next?

  1. Fair Pay Agreements and Pay Equality

A core part of Labour’s workplace and industrial relations election policies, FPAs are set to be introduced by the Government in order to set fair, basic employment conditions across an industry based on the employment standards that apply in that industry.

Although there are currently very few details about what FPAs may involve – Labour has suggested it will take 12 months to determine the details of the policy – we know that they are intended to effectively be a mechanism to introduce agreements such as that under the Care and Support Worker (Pay Equity) Settlement Act 2017 for care and support workers, into other industries. As a result of FPAs we will likely see legislative developments similar to the Settlement Act and greater bargaining power given to unions and employees.

FPAs will be agreed by businesses and unions within an industry to set basic standards for pay and other employment conditions within an industry, according to factors including job type and experience. The recent care and support workers’ settlement is an example of how these parties can reach an agreement to set base conditions across an industry.

The intention of FPAs is to prevent a “race to the bottom” seen in some industries, where good employers are undercut by bad employers who reduce labour costs through reducing wages and poor conditions. FPAs aim to create a framework for fair wage increases and prevent commercially disadvantaging good employers.

All employees and workplaces within the relevant industry will be covered by the FPA. Negotiations will begin once a “sufficient percentage” of employers or employees within an industry call for one. This threshold and the precise implementation of FPAs is to be developed by Government in consultation with stakeholders.

The effect of FPAs on businesses may be significant. Commentators have noted that FPAs will essentially be large collective agreements covering entire industries. Everyone in the occupation covered by the FPA would receive the same minimum pay, and be able to bargain, and strike, for additional pay.

Labour’s other policies include restoring the duty to conclude bargaining, and restoring the right of workers to initiate bargaining. Therefore, unions or employees could initiate industry wide bargaining and employers would be required to conclude bargaining.

Potential effects of this include wages being increased without employer agreement, and the potential for industry wide strike actions. Further, collective bargaining will be permitted on top of FPAs provided the deal is not less than the FPA.

Small businesses will be likely feel the effects of FPAs to a greater extent than larger businesses within an industry. However, as FPAs have been likened to the Settlement Act for care and support workers, there may be a provision for funding to provide for wage increases. There has been no commentary on this as yet.

As discussed above, we also expect to see developments with the Employment (Pay Equity and Equal Pay) Bill. This is expected to be in line with the principles of the Joint Working Group on Pay Equity and will likely make it easier for pay equity claims to be made than under the Bill put forward under the previous National Government.

  1. Trial Periods

A controversial part of Labour’s policies included replacing the current 90 day trial periods, or National’s “fire at will law” and replacing them with a fair trial period that provide protections against unjustified dismissal and a simple, fair and fast referee service. The new trial periods would require employers to provide reasons for dismissal and provide employees with recourse for unjustified dismissal during the trial period. Employment disputes relating to trial periods would be heard by a referee service, without lawyers present, and referees would have powers to make final, binding decisions, including reinstatement and award damages. There has been no discussion to date about whether these changes are imminent.

  1. Other changes?

Another controversial policy which featured in the election policies of Labour and the Green Party was extending employment rights to contractors. Labour wanted to extend contractors the right to bargain collectively. The Green Party wanted to increase worker protections for contractors including introducing wages and conditions commensurate of employees. Although there has been no discussion about this as yet, a possible outcome could be that contractors are included within FPAs.

Abolishing the Youth and Training Wage was a common goal of all three Parties, so it is likely this will occur. However, the youth and training wages do not appear to be widely utilised, so abolishing it is unlikely to have a significant impact.

Labour has also proposed to double the amount of Labour Inspectors. This will have a positive impact to prevent exploitation of employees, however employers will need to review their practices to ensure they are doing everything required to comply with employment laws in New Zealand.

Other possible changes may include a review of short term, casual and temporary employment practices to ensure these workers are receiving protections.  It is also likely that programmes and incentives will be introduced, in line with the NZ First Coalition Agreement, to train and upskill the workforce to reduce youth and long term unemployment.

What does this all mean?

The possible impacts on employment law under the new Government are substantial. Clearly the changes are focused on increasing the rights and power of employees and unions. The obligations on employers are likely to increase significantly, including the requirement to increase wages. Greater participation in collective bargaining, and participation in industry wide bargaining, is also a likely outcome, particularly when FPAs are introduced.

At this stage, due to the very limited details the new Government has shared on how these policies will be implemented, and what they will entail, it is difficult to predict how exactly employment in New Zealand will change. What we do know is that employers and employees should watch this space for how their rights and obligations will change in the coming months.


Second HSWA case in the District Court – WorkSafe New Zealand v Rangiora Carpets

The second sentencing decision under the Health and Safety at Work Act 2015 (HSWA) was released this month by the District Court (Court) and has provided some guidance on how culpability is to be assessed.

In Worksafe New Zealand v Rangiora Carpets Ltd [2017] NZDC 22587 an employee was injured after she slipped and fell 2.7 metres off a mezzanine floor and through a false ceiling, breaking her arm, shoulder, collarbone, and pelvis and suffering a laceration to her head. The injury left her hospitalised for eight days and required her husband to take 8 weeks off work to look after her.

The mezzanine floor was located immediately adjacent to a false ceiling that was not capable of bearing any significant weight. There was no balustrade or edge protection to partition the mezzanine from the false ceiling and stop workers from falling onto and through the false ceiling to the floor below.

The Court agreed that the approach to sentencing was the same three step process as under the old regime. However, it was accepted that, due to the additional orders now available to the Court under the HSWA, it was appropriate to consider making any additional orders after fixing the amount of the fine and before making an overall assessment.

The Court accepted that the increase in maximum penalty clearly signifies Parliament’s intention that fines for breaches of workplace health and safety obligations should increase from the former regime, and considered that it was appropriate to determine the starting point for a fine based on six culpability bands:

Culpability Band Fine
Low $0 – $150,000
Low/Medium $150,000 – $300,000
Medium $350,000 – $600,000
Medium/High $600,000 – $850,000
High $850,000 – $1,100,000
Extremely High $1,100,000 +

In the “total absence of guidance” available, the Judge acknowledged that the bands and sentencing levels were, to some extent, instinctive. However, including further bands was considered to give effect to Parliament’s intention that the fines should increase while also providing a more workable framework and assisting with consistency in sentencing.

In setting the fine, the Court considered that the hazard would have been obvious, was cheaply and easily remediated, involved a potential fall from at least a moderate height with the prospect of significant injuries, and acknowledged that the mezzanine was a storage area as distinct from a roofing company where workers would routinely operate at height.

With this in mind, the starting point for the fine was set at $300,000.00.  The fine was then reduced to $157,500.00 due to Rangiora Carpet’s mitigating features including a blemish free safety record, remedial steps taken, remorse, cooperation and a guilty plea.


Dumpling supplier to pay more than $15,000 for employment breaches

A dumpling supplier in Christchurch has been ordered to pay more than $15,000 by the Employment Relations Authority (Authority) after a Labour Inspectorate investigation found breaches.

Dai’s Food Limited failed to keep holiday and leave records, provide employment agreements for all employees, correctly pay public holidays, and unlawfully deducted wages.

“Every employer must meet their obligations under New Zealand employment law, there are no excuses,” says Labour Inspectorate regional manager Loua Ward.

“There are many resources to help them do so, whether they look online at employment.govt.nz, to tools such as business.govt.nz’s Employment Agreement Builder, or to the ministry’s call centre.”

Dumplings from the company go to many restaurants and supermarkets in Christchurch, with Dai’s Food Limited connected as a founder and supplier to the Aunty Dai’s Dumplings chain.

“We want to be able to leave businesses to do their business, rather than bringing them through the ERA because of record keeping failures.

“Failure to meet obligations can mean penalties, restricted access to migrant labour, and damage to the reputation of your business.”  

Visit the Employment New Zealand website


Employer failed in its PAYE obligations

In Kininmonth v The New Zealand Property Market Limited [2017] NZERA Auckland 234 Ms Kininmonth was employed by The New Zealand Property Market Limited (NZ Property). She claimed she was constructively dismissed and unjustifiably disadvantaged in her employment as a consequence of the mismanagement of her taxes by NZ Property.

NZ Property claimed they were not liable for these actions because its agent, Cloud Accountants Limited (Cloud Accountants) had advised that the taxes were being managed, and NZ Property reasonably believed it could rely on that advice.

On 9 March 2015 Ms Kininmonth signed an employment agreement which provided for remuneration as a base salary of $40,000, plus sales commission.  The employment agreement provided for KiwiSaver and for the employer to pay contributions.

Ms Kininmonth understood that all PAYE would be deducted from her salary and commissions. This was upheld by Cloud Accountants who agreed this was the case, however on August 2015, the Inland Revenue Department (IRD) contacted Ms Kininmonth and informed her that she was required to pay withholding tax.

In May 2016 IRD sent Ms Kininmonth a bill for unpaid tax of $10,903.79.  Ms Kininmonth contacted Cloud Accountants expressing her concerns.  Cloud Accountants offered Ms Kininmonth advice on how she could repay the amounts owed.  Ms Kininmonth reviewed the amounts deducted for student loans and KiwiSaver and determined that nothing had been deducted from her previous commissions.

Ms Kininmonth had spoken to NZ Property Director, Ms Baker raising her concerns. Ms Baker met with Cloud Accountants and communicated Ms Kininmonth’s concerns.  Ms Kininmonth requested mediation with NZ Property and then sought stress leave.  Ms Kininmonth continued to follow up with Ms Baker on a number of inconsistencies.

On 30 May 2016 Ms Baker contacted Cloud Accountants, which confirmed that Ms Kininmonth’s tax and student loan repayments had been deducted incorrectly and she now owed $28,677.00. Ms Kininmonth withdrew consent from NZ Property to make deductions from her pay.

On June 8 2016 Ms Kininmonth resigned citing the mismanaged tax as a reason for this. She subsequently raised her personal grievances.

The first issue for the Authority was whether Ms Kininmonth was constructively dismissed.  Ms Kininmonth accepted her resignation occurred when she sought mediation.  NZ Property was willing to attend mediation.  At no stage did Ms Kininmonth signal resignation may occur.  NZ Property believed that Ms Kininmonth’s employment could continue into the foreseeable future. The Authority found because of this Ms Kininmonth was not constructively dismissed.

The Authority then considered Ms Kininmonth’s disadvantage claim.  It found that the primary responsibility of deducting taxes rested with the employer and a reasonable employer must have basic knowledge of the taxes its employees are required to pay, in this case PAYE.  NZ Property should have identified this defect from the beginning of the employment as Ms Baker was responsible for signing off all payments for employee taxes and deductions.  NZ Property’s failure to enquire further on her behalf disadvantaged her.  The Authority found the failure to deduct KiwiSaver was a disadvantage, however minor.

Ms Kininmonth purchased a number of assets on the advice her deductions were correct, which meant she had to sell some of these assets to meet her tax bill and avoid interest penalties.  This resulted in a loss of $5,500.00.  The Authority found the defects in this process were not minor and therefore found Ms Kininmonth to be disadvantaged.

The Authority awarded Ms Kininmonth compensation of $15,000.00 due to the stress as a result of the disadvantage, the lack of assistance provided to her over her mismanaged tax, ongoing stress and suffering a loss of $5,500.00.


Immigration

Increased employer compliance – Labour Inspectors set to double

Employers who employ migrants will already be aware that Immigration New Zealand (INZ) requires all employers who wish to employ non New Zealand citizens or residents to maintain compliance with New Zealand’s employment and immigration laws.

The new Labour-led Government has vowed to increase the number of Labour Inspectors to almost double the present number of 60 to 110 over the next three years, at a cost of around $9 million.  With an increased focus of the Labour Inspectorate on investigation and prosecution, as more resources become available, we expect INZ will take a far more proactive approach with respect to employers to enforce immigration compliance.  In fact, we have already noticed an increase in instructions around immigration compliance issues (including prosecutions) this year, so it looks like that is going to grow over the next three years.

We expect the Labour Inspectorate to target those areas where they know there is poor compliance with minimum employment standards including the hospitality, cleaning, horticulture and construction industries.  Employers should be mindful that a Labour Inspector could come to your workplace at any time and ask to see copies of employee information including wages, time and holiday leave records, and answer questions to ensure relevant Acts have been complied with.

It is imperative that employers can demonstrate they have good workplace practices, and that they are complying with immigration and employment legislation.  While most employers reading this article will believe this is not a problem, it is often very small or subtle issues that can create a problem.  Generally we identify issues with systems/policies or a misunderstanding of obligations with every employer we conduct an immigration compliance audit on.  This relates to not only small employers, but we have identified compliance issues and out of date compliance systems in many larger national employers too.

If you believe you may have any issues with your workplace practices or processes, or it has been a long time since you have had your systems audited for possible immigration compliance gaps, please reach out to us to discuss a friendly audit process before a Labour Inspector comes calling.


Workplace Law Team

If you have any queries in respect of the above, or any other workplace law issues, please contact a member of Lane Neave’s Workplace Law Team:

Employment: Andrew Shaw, Fiona McMillan, Siobhan Rastrick, Gwen Drewitt; Hannah Martin; Holly Struckman; Anna Needham
Immigration: Mark Williams, Rachael Mason, Nicky Robertson, Hetish Lochan, Daniel Kruger, Julia Strickett, Rita Worner, Lavinia Shanks, Winnie Chen, Caroline Edwards, Ken Huang
ACC: Andrew Shaw
Health and Safety: Andrew ShawFiona McMillan, Gwen Drewitt

Disclaimer: Our aim is to assist our clients to be proactive in ensuring statutory compliance and best risk management in the area of employment law. This publication is, however, necessarily brief and general in nature. You should therefore seek professional advice before taking any action in relation to the matters dealt with in this publication.