Employment Law Update

Recent changes to Employment Act not be too stressful.

If you follow the news you’d think that being an employer has just become impossibly complicated but don’t let the media’s search for the sensational distract you. The recent changes to the Employment Relations Act are not so hard to understand, and those who have wound themselves up over the calculation of holiday pay may need a holiday themselves.

Holidays first. When a person is on paid leave it seems obvious that they should be paid for that day as if they were working it. But the obvious is not always simple. The present problems have arisen because there are two ways to calculate how much a normal day’s pay is, and the employer is obliged to select the one most advantageous to the employee.

The first method is to look at the person’s ’ordinary weekly pay’, an average taken over the past four weeks. This might be thought of as their current earnings. The second is to look at their ’annual average’, measured over the past 12 months. That is more of a general position taking in ups and downs.

Those two measures can produce different outcomes, and the measure that is best for any particular employee may depend on when it is they take their holiday. An oblivious example is where someone’s rate of pay moves from $20 an hour to $30 an hour. If the method chosen is the last four weeks it will reflect the higher rate, but the 12-month average might be predominately the old rate. Likewise, if the employee works paid overtime in winter but takes a holiday in summer, the figure based on the past four weeks might ignore the winter’s higher earnings whereas the annual figure includes it in the averaging. The sign to look out for is fluctuations in earnings.

Your payroll service provider will no doubt be onto this issue and will (or soon will) have ways for you to check past payments; but for big organisations, such as MBIE, the numbers add up and make for good headlines high in embarrassment value.

The changes to the Employment Relations Act address zero-hour contracts and two related topics. Zero-hour contracts are out. In essence, a zero-hour contract requires the employee to work when requested but doesn’t promise any request will be made. All such agreements must now have a base number of hours that are guaranteed, be founded on genuine reasons and provide reasonable compensation to the employee for the need to be available. If the agreement falls short, the requirement that the employee be available is not enforceable. What are genuine reasons and how much compensation is reasonable? The Act provides guidance on both issues but doesn’t contain a set of ins and outs. We will have to await case law to set the boundaries.

Two other changes appear to be directed at cutting off potential zero-hour work-arounds. Secondary employment restrictions must now have a genuine reason and the reason(s) must be stated in the agreement itself. Likewise, if the employer
wants to allow for shift cancellation, that needs to be in the employment agreement. The agreement must specify a reasonable notice period to be given prior to the cancellation and provide for reasonable compensation to be paid to the employee as recompense for the cancellation. Fail to meet those requirements and the employer will be obliged to pay the employee for the cancelled shift as if they worked it. As with the availability requirements, the grey areas will need to be fleshed out through case law.

But now would be a good time to have your template employment agreements reviewed, particularly those for casual staff.

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