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Employment Law Reform Submission


Employment Law Reform Submission

Phillips Fox Highlights Technical Difficulties In Employment Relations Law Reform Bill

Lawyers from the trans-Tasman commercial law firm, Phillips Fox, told a Parliamentary Select Committee yesterday that the Employment Relations Law Reform Bill contains significant technical difficulties for business.

Auckland employment partner, John Hannan, said the firm's submission is based on how the bill impacts on its New Zealand clients. "This includes a number of technical points regarding the drafting of the bill, interaction between various sections and with the existing Employment Relations Act."

For example, Mr Hannan has outlined sections relating to good faith which extend the concept of good faith by requiring employers, unions and employees to be "responsive, communicative and supportive," as well as "active and constructive in establishing and maintaining a productive employment relationship."

He questions whether the Employment Relations Authority (ERA) is the right body to determine these matters, suggesting that this sort of language raises issues about whether a judicial-type body is suitable to make such heavily value-laden assessments of behaviour. He proposes deleting this wording and substituting more detailed definitions of good faith behaviour.

When it comes to good faith and collective bargaining, Mr Hannan says there are "two moments" that will inevitably lead to extensive litigation. The first is when someone tries to refer bargaining to the ERA for facilitation.

"This triggers certain sections in Clause 15 in the proposed bill which can ultimately lead to findings by the ERA which are adverse to parties' interests. So people who are having difficulty reaching agreement on a collective employment agreement (CEA) and don't want to make the concessions sought by the other party, will have to litigate.

"Similarly, there is likely to be significant litigation relating to another section in this same clause which gives the ERA the power to fix the provisions of the collective agreement."

He suggests that this, together with the proposed ability of the ERA to impose a collective agreement, may breach requirements of the International Labour Organisation Convention C98 on Collective Bargaining and should be reassessed. "Compulsory CEAs are not certainly required by the Convention - and there is an argument they may be in breach of it."

Another part of the bill he thinks raises technical problems is the change to the test for justification of dismissals or other disciplinary action. Mr Hannan says an additional requirement to balance the "legitimate interests" of both parties gives no guidance about the meaning of "legitimate interests". He asks whether the intention is for the private life and responsibilities of an employee to be factored in by an employer when deciding what disciplinary action is justified. "Does this mean that it will be harder to justify dismissing an employee who supports a spouse and children than it will be to justify dismissing a single worker?"

"The more rigorous tests that employers will have to pass to justify dismissal or other disciplinary action will inevitably raise big questions and we recommend that the sub-clause is deleted or guidance provided on the meaning of "legitimate interests."

When it comes to a clause dealing with protection of "vulnerable" employees when their employer's business is restructured, Mr Hannan says the proposed bill opens a wide range of difficult issues that it does not define. ("Vulnerable" employees are those providing food and cleaning services, or laundry, orderly or caretaking services in the health and education sectors.)

"The absence of a number of key definitions means the scope of protections is unclear. If definitions are not added, both employers and employees will be forced to take costly test cases to the courts to establish the cost of the legislation. For example, would the sale of a key asset - say a large item of food manufacturing plant - be a sale of 'part of the employer's business' which would trigger the protection provisions?

Equal pay provisions of the bill also come under fire. Mr Hannan says it is unclear whether an employer can pay different rates for different performance levels, when a female employee is doing similar work to a male employee and they both have the same skills, experience and knowledge backgrounds.

He urges that the concept of "special rate of pay" be revised to allow for different pay rates based on different performance levels and to avoid the implication that a "special rate of pay" is a rate set outside the normal boundaries of rate setting based on performance.

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