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Employment Relations Bill - Gen. Policy Statement

Employment Relations Bill

Government Bill

Explanatory Note

General Policy Statement


This Bill implements Government policy to repeal the Employment Contracts Act 1991 and introduce a framework for the conduct of employment relations based on the understanding that employment is a human relationship involving issues of mutual trust, confidence and fair dealing, not simply a contractual, economic exchange, and that this requires specific recognition in any regulation of the relationship – something not satisfactorily achieved by general contract law.

The overarching objective of the Employment Relations Bill is therefore to build productive employment relationships through the promotion of mutual trust and confidence in all aspects of the employment environment. The employment environment encompasses the entire complex and dynamic system of relationships, which includes all participants, not just employers and employees. In order to achieve this primary purpose, the Bill specifically:

 recognises that employment relationships must be built on good faith behaviour;
 acknowledges and addresses the inherent inequality of bargaining power in employment relationships;
 promotes collective bargaining;
 protects the integrity of individual choice;
 promotes mediation as the primary problem-resolving mechanism; and
 reduces the need for judicial intervention.

The Bill also seeks to promote observance in New Zealand of principles underlying the ‘core’ International Labour Organisation conventions 87 and 98, regarding the right to freedom of association for all employees and employers, and the promotion of collective bargaining.

In order to address the issues underlying its objectives, the Bill therefore promotes the voluntary organisation of employees via unions and collective bargaining as the best means of redressing bargaining power imbalances, whilst giving individuals the choice as to how their terms and conditions are negotiated, either individually or collectively. Alongside this is the notion that the employment relationship itself should be conducted in a manner that promotes good faith, fair dealing and mutual trust and confidence between the parties.

In particular, the Bill requires employers and unions to conduct their collective relationships in good faith. Whilst good faith will be of particular importance during negotiations, the duty will apply at all times – essentially it will require all participants in the employment environment to act reasonably in their dealings with each other. In a bargaining context, however, good faith will not require the parties to conclude collective agreements or specify particular outcomes, recognising that these are for the parties themselves to determine and that the most effective means of settling problems is by the voluntary agreement between the parties.

The Bill provides a range of services, bodies and judicial institutions designed to support good faith and the overall objectives of providing informal, accessible and effective means of problem resolution which, in turn, are intended to support and enhance ongoing employment relationships wherever possible.

Summary of Key Elements

Good Faith

The principle of good faith underpins the Bill, both generally and specifically. The simple requirement of the concept is that the parties to employment relationships (unions, employers and employees) deal with each other in good faith, and that those dealings are based on fair dealing and mutual trust and confidence. This includes, but is not limited to, not directly or indirectly misleading or deceiving each other.

In respect of collective bargaining, “core” good faith duties are defined, although the concept is not limited to these alone. The Bill also provides for the tripartite development of a Code of Good Faith, dealing with the specific application of the general principles of good faith.

For individual employment relationships, good faith will be expressed through the application of the common law concept of mutual trust and confidence, as well as specific provisions in the Bill dealing with unfair bargaining.

Dependent contractors

With regard to dependent contractors, the Bill extends access to the rights, obligations and protections of employment law to those persons who are currently classified as “independent contractors,” but are in reality working in situations that are identical to an employment relationship. To this end, the Bill provides clear statutory direction in the application of specific legal tests when deciding whether individuals or groups employed as nominally independent contractors are, in fact, actually employees. The primary consideration is given to the reality of the relationship, rather than the nominal “label” given by the parties to it. Similarly, to provide better access to employment rights for often poorly resourced people, the Bill makes provision for class actions which may be taken by a union or state agency, for example the Labour Inspectorate, on behalf of a group.

Freedom of Association

Importantly, to maintain a balance between collective and individual employment rights, the Bill retains provisions for freedom of association, namely the voluntary membership of unions and prohibitions on any preference or undue influence in employment arrangements designed to influence the choice of whether to become or not become, remain or cease to be, a union member.


Recognising the inherent imbalance of power and influence in the employment relationship, the Bill promotes collective organisation of employees. Accordingly unions are given specific legal recognition as representatives of employees’ interests.

The Bill makes provision for the lawful operation of unions. In order to participate in collective bargaining and fulfil other roles specified in the Bill, unions must be registered. Registration will involve satisfying the Registrar of Unions that the union is a democratic organisation of employees that is accountable to its members, independent of employers, and has appropriate rules (that are not unreasonable, undemocratic, unfairly discriminatory or unfairly prejudicial, or contrary to law).

It is intended that the Registrar will take a proactive role in disseminating information about how to meet the registration requirements. The Registrar will also be able to investigate complaints over whether unions are fulfilling their obligations under the Act, and enforce these through the Employment Relations Authority established by the Bill.

Union membership will authorise the union to represent members in their relationships with employers and the employment institutions (although unions may develop different categories of membership for functions outside of those dealt with by the Bill – for example in relation to certain benefits or specialist services they may provide). In order to carry out their roles, unions will have statutory rights of access to workplaces for bargaining, representation, and union business purposes, including recruitment (in all cases subject to not unreasonably interfering with the conduct of the employer’s business). A statutory entitlement to paid union meetings for union members is also provided.


The Bill provides specific procedural requirements to enable the orderly conduct of collective bargaining on both a single and multi-party basis. Unions may be required to ballot members prior to entering into multi-union or multi-employer negotiations to ensure that each enterprise indicates a simple majority in support of the negotiations. To promote bargaining flexibility the Bill includes procedures for the addition of parties after negotiations have commenced, subject to the agreement of the existing parties.

Only employers and registered unions will be able to negotiate and be parties to collective agreements. The parties to collective bargaining must meet specific good faith obligations, but these do not require unions or employers to settle, or include particular matters in, agreements. However, all agreements must:

 state the term of the agreement;
 describe the coverage of the agreement;
 make provision for variations to the agreement during its term;
 be in writing; and
 have a maximum term of 3 years.

Similarly, all collective agreements will have an implied term (which may be varied or excluded by agreement) that employees bound by it will continue to be employed by the employer for the term of the agreement. This provision is intended to provide employment security and certainty in situations where work or employees are “contracted out” or the business sold by the employer. This will not, however, limit or affect an employer’s right to dismiss an employee for just cause.

Where a collective agreement expires, employees bound by it are deemed to be employed on individual employment agreements based on the previous collective agreement.

Terms and Conditions of Employment

The Bill provides for both collective and individual employment relationships and sets processes for negotiating employment agreements.

Essentially, collective agreements set the terms and conditions of union members who undertake the work covered by the coverage clause of the collective agreement. Additional terms and conditions can also be negotiated on an individual basis, provided that these are not inconsistent with those of the collective agreement. Any employee can elect to be employed on the collective agreement at any time, if they fall within the coverage clause of the agreement, by joining the union.

Recognising that employees are often most vulnerable at the commencement of employment the Bill makes special provision to protect new employees.

For the first 30 days of employment new employees who are not union members, but whose work falls within the coverage clause of an existing collective agreement will be employed on the terms and conditions of the applicable collective agreement and any other agreed individual terms and conditions that are not inconsistent with those of the applicable collective agreement.

After the 30-day period, if the employee has not joined the union, the employee may agree with their employer to any changes to their terms and conditions.

Where new employees are employed doing work that does not fall within the coverage clause of any collective agreement, or where there is no collective agreement in place at all, then any terms and conditions mutually agreed to between the employer and employee will apply in the form of an individual employment agreement. However, before any such agreement is made, the employer is required to give the employee all relevant information regarding the agreement(s) available, or a written notice stating the parties to it, the work to be performed, hours and place of work, rest and meal breaks (if any) and proposed rate of pay. The employer is also required to give the employee the opportunity to seek independent advice and to inform the employee that they have this right, before any agreement is finalised and agreed.

The Bill also specifically provides for protections where bargaining occurs to secure an individual agreement in cases where the individual concerned is unable to bargain freely and fairly. Such occasions are deemed to occur where the person is unable to understand the implications of what they are agreeing to due to diminished capacity on their part (whether through age, illness or other disability), reliance on the advice of the other party or lack of relevant information, being subject to oppressive means, undue influence or duress, or any other form of serious disadvantage. If such situations are unable to be resolved through mediation, and any other remedy would be inappropriate or inadequate, the Employment Relations Authority will be able to make an order cancelling or varying the terms of the agreement.

Employment Relations Education Leave

The Bill provides a statutory entitlement for employees bound by, or negotiating collective agreements, for paid leave, intended to improve their knowledge about employment related matters and help support good faith behaviour and co-operation in the workplace. This leave is to be paid for by employers and will be a collective entitlement held and administered by unions. Courses for the purpose of employment relations education leave will be approved by the Minister of Labour or a delegate(s). The Minister of Labour intends to establish a tripartite panel for this purpose. A State-funded contestable fund will also be established outside the legislation for the purpose of funding the provision of employment relations education by unions, employers or other providers.

Strikes and lockouts

The Bill provides for lawful strikes and lockout actions to be taken in pursuit of single or multi-party collective agreements after the expiry of an existing collective agreement and where the parties have been negotiating for at least 40 days. Allowing strikes and lockouts recognises that, from time to time, parties in collective bargaining will have strongly held positions about their employment relationships and will want to express their dissatisfaction with the status quo and their desire for change without bringing the employment relationship to an end. Good faith behaviour does not preclude strikes or lockouts during the negotiation of a collective agreement. This is consistent with the emphasis of the Bill on maintaining and enhancing the employment relationship - continuity of employment, even if interrupted, is better than ending the employment relationship.

In particular, the Bill expressly provides that during lawful industrial action employers may not:
 dismiss employees simply because they are taking part in a lawful strike or are affected by a lockout;
 lock out employees who are not part of collective bargaining; or
 require employees not involved in the relevant collective bargaining to perform work which would otherwise be performed by the striking or locked-out employees, or hire replacement employees to perform this work, unless there are safety and health reasons to do so.

The right of the employer to suspend employees without pay where they are striking or to suspend non-striking employees, where normal work is not available because of a strike or lockout will, however, remain.

With regard to essential services, the current 3 and 14 day notice requirements before strike or lockout action is taken will be retained, but the requirement to give notice will be triggered by whether there are public interest grounds, including public health and safety involved in the industrial action. There will be a duty to notify the Chief Executive of the Department of Labour (as well as the employer or union) of any proposed strike or lockout involving essential industries so that mediation services are available and taken up during the notice period before any strike, lockout or injunction actions occur.

Personal Grievances & Problem Resolution

Consistent with the emphasis on the maintenance of the employment relationship wherever practicable, reinstatement becomes the primary remedy for grievances where this is sought by the complainant.

The Bill also provides that any probationary arrangements agreed to between new employees and their employers must be specified in the relevant individual employment agreement or collective agreement, and that these must not be inconsistent with the personal grievance procedures (i.e. failure to continue the employment of a probationer must still be justifiable).

In terms of problem resolution in employment relationships, a strong emphasis is placed on the prior resolution of problems by the parties themselves, who will have access to a wide range of resources, through information provision, structured or unstructured mediation and other services to voluntarily resolve matters at an early stage. Mediation is the preferred option at all stages, although it is recognised that some problems will nevertheless eventually require specialist intervention, but this should not necessarily be constrained by the application of strict procedural requirements.

A key element of this approach is the establishment of specialist nation-wide mediation services, delivered via range of information and problem resolution means provided by the Department of Labour, operating across the whole range of employment problems to facilitate their speedy resolution. The Bill embodies a general presumption that mediation will be the first port of call for dispute resolution before any decision-making forum is sought. Mediation, in this context, takes on a very broad and flexible meaning, in effect covering any service or intervention that can make a difference. The Bill gives the providers of these services wide discretion to operate as they see fit to meet the objectives of mediation, including the ability, by the consent of the parties, to conclude mediated settlements with no right of appeal. While mediation is not compulsory in all cases, the Bill makes it a general prerequisite that all mediation options should be exhausted, wherever practicable, before further actions can be taken.

The Bill also establishes a separate specialist lower level investigatory body, known as the Employment Relations Authority (ERA), to investigate employment problems in a speedy and non-adversarial way. Members of the Authority will have the power to gather information, call evidence and investigate matters as they see fit, in order to understand the key issues in dispute, and make pragmatic determinations about them. It is intended that the Authority will make practical decisions quickly, with a minimum of detail, focusing on key issues and how to resolve them. Informality will be emphasised in the ERA, and efforts to achieve prior settlement encouraged by enabling the Authority to order the parties to try to resolve their differences through mediation before it proceeds to deal with any matter, where this is appropriate in the circumstances.

While the Bill retains the Employment Court in its present form, the role of the Court is amended in that its first instance jurisdiction will only be in the areas of torts and injunctions. The Court will also hear cases where the parties are dissatisfied with a determination of the Employment Relations Authority. However, this will not be in the form of an appeal, but as a full judicial hearing of the original problem. Any appeals from a decision of the Employment Court will be heard by the Court of Appeal, on points of law.

Labour Inspectorate

The Bill enhances the powers of Labour Inspectors, by enabling them to serve “demand notices” on employers for the direct recovery of minimum code entitlements where the Inspector is satisfied a liability exists. An employer can accept or contest the notice in the Employment Relations Authority. The power is intended to function much like the ability of Police Officers to traffic infringement notices, and to address the delays presently experienced by Inspectors in enforcing obligations in the first instance through the Employment Tribunal. The intention is to reduce the need for litigation and associated enforcement costs and enable a speedier and lower level recovery of employees’ entitlements.

State Sector

The provisions of the Bill apply equally to the State Sector as to the private sector. Special provision is, however, made to amend the State Sector Act 1988 to reinstate kindergartens as part of the Education Service for the purposes of that Bill.

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