Practice Area Articles
New Zealand
February 05, 2024
By Paul Hastings Professional
Back to International Employment Law
KEY DEVELOPMENTS FOR 2024
Anticipated shifts in the employment law landscape are expected with the change in Government. The preliminary election results suggest that the New Zealand National Party, ACT New Zealand, and New Zealand will likely need to form a coalition to govern. Together they are proposing policy changes that could bring significant modifications to employment legislation. Currently, the potential legislative changes mentioned below are somewhat speculative. Should the new Government choose to enact these changes, the process would necessitate a reasonable amount of time to undergo the required parliamentary procedures before becoming law. Consequently, these changes remain in the realm of anticipation and uncertainty at this stage.
Employment trial periods
The New Zealand National Party and ACT New Zealand are jointly proposing the reinstatement of the 90-day trial period for all employers, regardless of the number of employees. Existing legislation allows for a 90-day trial period only for employers who have fewer than 20 employees. If agreed between the political parties and implemented by the wider Government, these trial period would provide employers with the ability to terminate the employment relationship within the first 90 days. Crucially, the employee would have no recourse to a personal grievance for unjustified dismissal.
Fair Pay agreements
The New Zealand National Party has announced that, on forming a Government, it intends to immediately repeal the Fair Pay Agreement Act 2022. The Act proposed a number of fair pay agreements as a minimum set of terms and conditions across an entire industry or occupation, such as bus drivers, hospitality workers, or port workers. In terms of existing implementation, bargaining has commenced for some fair pay agreements, but none have been concluded. It is certainly likely that no agreements will be concluded in the foreseeable future. This repeal is likely to take place in early 2024.
Gender pay transparency
Legislation has been proposed requiring large companies to disclose their gender pay gaps. Under this proposal, organisations with more than 250 employees would be mandated to publicly report their gender pay disparities to a designated reporting body. The New Zealand National Party’s women’s spokesperson said that she supported a requirement for large companies to report on their gender pay gap, but the party’s official position remains unclear. Meanwhile, ACT New Zealand does not support a mandatory and broad pay transparency regime. It is therefore likely that the proposed changes to the legislation are highly dependent on the outcome of coalition discussions. At the time of writing, it remains uncertain whether the party will continue with, amend, or abandon the currently proposed legislation.
KEY DEVELOPMENTS FOR 2023
Fair Pay Agreements Act 2022
The Fair Pay Agreements Act came into force on 1 December 2022. The Fair Pay Agreements Act 2022 sets up a framework for bargaining for fair pay agreements that, once in place, will specify industry or occupation-wide minimum employment terms. This is the biggest change in New Zealand’s employment relations landscape in 20 years.
It is widely expected that industries such as cleaners, bus drivers and security guards will be the first to start bargaining for an FPA. Employers in these sectors and other low-wage industries should start thinking about bargaining and how they might participate in the process. They should also consider how increases to employee entitlements and pay could impact on their bottom line once a fair pay agreement is in force.
There are numerous gaps in the Fair Pay Agreements Act and this will inevitably need to be addressed through litigation. The time that litigation will take to progress through the Employment Relations Authority and Employment Court will cause delay to finalisation of any fair pay agreements. This makes it likely that no fair pay agreements will be finalised by the next election in late 2023. The National Party, New Zealand’s major opposition party, has promised to repeal this legislation if elected. As a result, the future of fair pay agreements and whether they significantly impact the labour law landscape, will likely hinge on next year’s election.
Potential Holidays Act 2003 changes
The Government has signalled that it will make substantial amendments to the Holidays Act 2003. The Holidays Act governs employees’ minimum entitlements to leave in New Zealand. New legislation was due to be introduced in 2022 but is yet to be sighted.
It is proposed that three (instead of two) calculations are used for calculating payment for annual holidays. All payments received by employees, except for reimbursements, are proposed to be included in these calculations. Another proposed key change is for an extra day of sick leave to be available from the first day of employment, with an additional day of entitlement per month of employment until the full 10-day entitlement is reached. Currently, employees are required to work for six months before they are entitled to sick leave.
Whilst the above changes (and the other proposed changes) may go some way to aligning the Holidays Act 2003 with modern work practices, it appears unlikely to resolve any of the current complexities of the Act. Unintentional non-compliance is therefore likely to continue, and compliance costs are expected to remain high. As a result, employers should keep an eye on these changes while transitioning to the new Act, and the introduction of new payroll systems, is likely to be a significant exercise.
Time for raising personal grievances relating to sexual harassment extended from 90 days to 12 months
If an employee wants to bring a claim against their employer, they must raise a personal grievance within 90 days beginning on the day on which the action alleged to amount to a personal grievance occurred.
The Employment Relations (Extended Time for Personal Grievance for Sexual Harassment) Amendment Bill proposes to extend the time employees have available to raise a personal grievance that involves allegations of sexual harassment from 90 days to 12 months. The Bill has so far received cross-party support and is therefore likely to be passed in the next few months.
The Bill is not expected to have retrospective effect and employers will likely not experience any spike in historic claims. However, going forward, this change will further incentivise employers to proactively address and investigate any allegations of sexual harassment.
KEY DEVELOPMENTS FOR 2022
Introduction of 2021 Resident Visa
New Zealand’s border was closed to almost all travellers for almost two years as a result of the COVID-10 pandemic. This made it extremely difficult for employers to obtain overseas workers and has led to uncertainty for on-shore work visa holders. In September 2021, the Government announced the introduction of the ‘2021 Resident Visa’ which would provide a streamlined path to residency for a large number of work visa holders (approximately 165,000 individuals will be eligible).
The 2021 Resident Visa will provide migrant workers and their employers with significantly more certainty as they will be able remain in New Zealand permanently. On the other hand, migrant workers who obtain a 2021 Resident Visa will no longer be ‘tied’ to their current employer which may result in a more dynamic labour market in industries with a higher proportion of migrant workers (e.g. engineering, IT, construction). The border reopening, coupled with upcoming changes to work visa schemes, will allow employers to recruit and hire individuals from overseas. The upcoming changes are designed to place more scrutiny on work visa applications, to reduce New Zealand’s reliance on low wage migrant workers.
Employers should engage with their migrant workers to see if they will be eligible for the 2021 Resident Visa. Employers and migrant workers must ensure that the worker maintains a valid temporary work visa until a residency visa is granted which may still be some time away. In addition, employers wanting to recruit migrant workers under the new work visa scheme, should ensure they understand the system and its new requirements before beginning the application process.
New Fair Pay Agreement system to structure bargaining for minimum employment terms and conditions
In May 2021 the Government announced the Fair Pay Agreement system. The system is designed to structure bargaining for minimum terms and conditions for all employees in a certain industry or occupation. Draft legislation for the Fair Pay Agreements Bill was introduced into Parliament on 29 March 2022 and is now going through the full parliamentary process.
Employers in highly unionised industries or industries where workers receive low pay or are vulnerable to exploitation, should engage in the legislative process. These employers are the most likely to be drawn into Fair Pay Agreement bargaining.
While Fair Pay Agreement legislation is still some time away, employers should familiarise themselves with the Fair Pay Agreement system (as it is currently proposed).
Development of Covid-19 vaccination policies
Workplaces are increasingly developing and introducing workplace COVID-19 vaccination policies. Employers need to ensure that any requirement to be vaccinated is ‘fair and reasonable in all of the circumstances’ and follows a consultation process with affected employees. Employers must also ensure that “all other reasonable alternatives” are “exhausted” before terminating an employee based on their unvaccinated status.
Employers that rush into developing and introducing a vaccine policy risk significant pushback from unvaccinated employees. Employers that terminate an employee based on their unvaccinated status may face a personal grievance for unjustifiable dismissal (and unjustifiable disadvantage).
Employers should therefore seek legal advice when developing and introducing a vaccine policy. Where an employee is not vaccinated in accordance with such a policy, employers should seek further legal advice to ensure that all reasonable alternatives to termination are exhausted, and to ensure that the termination process (if applicable) is justifiable.
Consultation on new income insurance scheme
Consultation has started on a Government income insurance scheme. The scheme would see employees who lose their work due to redundancy or health conditions, receive 80% of their usual pay for up to 7 months. It would be funded by a new tax on wages and salaries with employers and employees each paying an estimated 1.39%. At this early stage, employers can provide feedback on the scheme.
KEY DEVELOPMENTS FOR 2021
Increase in sick leave
A change in the Holidays Act was passed so that the current minimum entitlement to five days sick leave per annum increased to 10 days sick leave per annum as from mid July 2021. This means that if employers are preparing employment agreements for new employees they need to reflect the change in sick leave. This is due to the fact that an employee is entitled to sick leave under the Holidays Act after six months' continuous service with that employer
Flexible working arrangements/stress
In New Zealand employees were able to return to the workplace last year. Despite this, employees have been somewhat reluctant to return to the workplace. Many still continue to work remotely. Some employers have embraced this whilst others have been considering ways and means to force the employees back to the workplace. As a consequence of this, there have been some tensions and in particular, issues as to stress have arisen. It is anticipated that there will be more mental health issues arising in an employment context as a result of the effects of COVID‑19.
Fair pay agreements
A Labour Government was re‑elected in New Zealand last year. This time it was not a coalition and this has meant the Labour Government has been able to introduce more worker friendly legislation. The most contentious worker friendly legislation that it is now promoting is the introduction of Fair Pay Agreements in New Zealand. This will probably be the largest shift on the employment regulatory landscape in New Zealand for the past 20 years. The legislation is to be drafted and was due to be introduced in late 2021 with a view to being passed into law sometime in 2022.
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”.
Zero-Hour Contracts
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.
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