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Test case reveals difficulties

19 July 2005

Test case reveals difficulties of artificial restrictions on business

Business NZ has welcomed the result of a test case on 'succession contracting' in the Employment Court.

The case Gibbs v Crest Commercial Cleaning was an application by employees who, under last year's amendment to the Employment Relations Act (vulnerable workers provisions), sought to transfer their employment to the new contractor after their employer lost the contract to clean for the Dunedin Kindergarten Association.

The Employment Court rejected the application, saying that changes by select committee to wording of the legislation meant the Court could not be confident that Parliament intended that kind of situation to be covered by the Act.

Business NZ Chief Executive Phil O'Reilly said the business community opposed restrictions on selling or contracting out parts of a business.

"If this case had succeeded, it would have resulted in a Court ordering an employer to employ certain employees. That goes against fundamental principles of freedom.

"It would also be damaging to enterprise. Requiring a business to continue using the employees of contractor A in a situation where contractor B takes over the work - this part of the Act has always been opposed by business, since it would hold back a company's ability to get improvements in quality or efficiency.

"This case failed because of issues with the wording of the Act, indicating, among other things, the difficulty of implementing this kind of artificial restriction on business."


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