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After 12 months - the ERA achieves its objectives

17/10/2001 Media Statement

After 12 months - the ERA achieves its objectives

The Minister of Labour Margaret Wilson says an Employment Relations Service report on the first 12 months of the Employment Relations Act shows that it is a balanced and practical piece of legislation, supporting good relationships in the workplace.

Margaret Wilson says the report shows:

- The ERA is easy to work with: Despite the newness of the Act, and enhanced publicity there has been only a 9% increase in inquiries to the Employment Relationship Service over the last year of the ECA. This shows that the ERA has been easily understood and that employers, managers, employees and unions are operating under it successfully.

- The Mediation Service is free, fast and fair: The Mediation Service received 6,768 requests for mediation assistance. Applications to the Service ranged per month from a minimum of 256 in October 2000 to a maximum of 702 in May 2001. Less than one in seven cases is recorded as “not settled”. Most cases are completed within 6 weeks. 89% of clients responding were either satisfied or very satisfied with the Service’s handling of their issue.

- The Employment Relations Authority is handling cases efficiently with little delay: The Authority completed 722 applications. During the period, the Authority also referred or directed 593 applications to mediation.

- Unions now have legal standing again: The Registrar of Unions received 166 applications for union registration as at 30 September 2001 and registered 159 unions. Legislation subsequent to a Court of Appeal ruling on union registration is now before a select committee.

- Union membership is increasing under the ERA: Union membership totals 319,660 employees, representing 22.1% of wage and salary earners, and 17.7% of the total employed labour force. A recent study by Raymond Harbridge reported union membership figures as at 31 December 2000 to be 318,519, an increase of 16,114 (5.3%) over the course of a year. The figures produced by the Registrar of Unions equate to an increase of 1141 (0.36%) in the 2 months following this study, confirming the upward trend in union membership.

- Satisfaction at mediation and before the Authority has seen few cases reach the Employment Court: The Court received 78 applications under the Employment Relations Act - 47% in Auckland, 11% in Christchurch and 42% in Wellington.

“The hysteria over the new law is now recalled only as a failed political campaign,” said Margaret Wilson There is general approval of the ERA from the public, business and unions. Even the National Party has now indicated support for the concepts of good faith and legal provision for unions. The consensus is growing as the new law proves itself in New Zealand workplaces”.

Attached: 12-month report of Employment Relations Service on ERA

One-Year Report

The Employment Relations Act

Enquiries 2

Labour Inspectorate 3

Mediation Service 3

Employment Relations Authority 4

Employment Tribunal 5

Employment Court 5

Registrar of Unions 6

Bargaining Outcomes 7

Work Stoppages 7

Cases 8

Note: This report covers the period from 2 October 2000, the date when the Employment Relations Act came into effect, to 30 September 2001. Comparative figures for the previous year, where applicable, cover the period from 1 October 1999 to 30 September 2000.

Enquiries

- The Auckland Info-line, Mediation Service and Labour Inspectorate answered a total of 207,897 enquiries during the first year under the Employment Relations Act (ERA). This compares with 190,159 enquiries received in the final year under the Employment Contracts Act (ECA) from 1 October 1999 to 30 September 2000. The Auckland Info-line answered 98% of all enquiries made during the period.

- As the graph below illustrates, enquiries increased sharply in the month the ERA came into force.

- The most frequent enquiry type over the year related to matters of leave and holidays at 28%. This is consistent with the previous year under the ECA, although as a percentage, the proportion of enquiries relating to such matters totalled 36%. In the first two months under the ERA, however, there were a large number of enquiries relating to collective bargaining, collective or individual agreement issues, and good faith with 25% of enquiries relating to such matters. Over the last ten months (December 2000 to September 2001), enquiries relating to these matters have reduced to an average of 16% per month, whereas enquiries relating to holidays and leave have accounted for 30% of the total enquiries over the same period. In the final year of operation under the ECA, 17% of enquiries related to general contract issues.

- During the period, the Auckland Info-line completed over 2,000 enquiries that required an officer to provide information to more than one party. In such situations, an offer is made by the officer to contact a respondent to ensure that the respondent is aware of what their obligations are under any relevant employment legislation.

- The Auckland Info-line conducted 111 talks or seminars with groups and organisations throughout the Auckland region during the period. Most recently, these talks have been directed at Citizens Advice Bureaux and secondary schools. Further, Info-line officers attended a youth expo, a Maori youth expo, a job-seek programme organised by the Department of Work and Income, and career seminars organised by the Salvation Army.

Labour Inspectorate

- The Labour Inspectorate received 1,802 complaints during the period compared with 1,735 received over the final year under the ECA.

- The vast majority of complaints (77%) for the period concerned breaches of the Holidays Act - 50% of complaints related to annual holidays, 22% related to public holidays, and 5% related to special leave. The remaining main types of complaints related to adult minimum wage (9%) and application of the Wages Protection Act (7%). This is consistent with applications received over the October 1999 to September 2000 period.

- The Labour Inspectorate completed 1,756 investigations during the period compared with the 1,667 in the previous 12 month period.

- The average time taken to commence an investigation of a complaint was 1.35 weeks and the average time taken to resolve a complaint was 12.56 weeks. It should be noted, however, that the specific circumstances of individual complaints often differs considerably and actual commencement and resolution times deviate widely around the average time.

- A total of $840,239.95 in arrears was recovered in complaints completed during the period. A total of $1,466.82 in interest and $21,000 penalties was also collected.

- During the period, Labour Inspectors held 72 talks or seminars at various schools and industrial locations informing people, among other things, about their employment rights and minimum employment standards. In particular, a recent focus has been on Maori, Pacific Island women and recent immigrants. Further, Inspectors have been involved in pro-active enforcement activities, most recently targeting panelbeaters and cargroomers, restaurants and cafes, and the agricultural sector.

- A large majority of clients (92% of employee clients and 82% of employer clients) surveyed during the October 2000 to September 2001 year about the Inspectorate’s enforcement activities were either “satisfied” or “very satisfied” with the overall conduct of the Inspectorate’s investigations.

Mediation Service

- The Mediation Service received 6,768 requests for mediation assistance. Applications to the Service ranged per month from a minimum of 256 in October 2000 to a maximum of 702 in May 2001.

- Personal grievances were the predominant application type to the Mediation Service with unjustifiable dismissal comprising the bulk (63%) of this category. The table below illustrates a breakdown of the main types of applications received by the Mediation Service.

Bargaining/Good Faith 6.8%

Disciplinary Problems 2.7%

Dispute 3.6%

Employees - Definition 0.3%

Individual Agreement 4.0%

Interim Reinstatement 0.2%

Minimum Code 1.7%

Other 9.4%

Personal Grievance 57.5%

Recovery of Wages 8.4%

Redundancy 4.7%

Strikes & Lockouts 0.4%

Unions 0.3%

- The Service completed 5,975 applications during the period. The table below illustrates a breakdown of the manner in which applications were disposed of.

Settled 54.2%

Not Settled 13.1%

Withdrawn 4.2%

Transferred 0.3%

Not proceeding 15.2%

Mediator Decision 0.4%

Recorded Settlement 11.7%

Partial Settlement 0.5%

Other 0.4%

- The settlement rate for applications completed (defined as those applications which were settled, partially settled, mediator decisions and recorded settlements, divided by the total applications completed) during the period was 66.8%.

- Terms of settlement varied widely in those cases that were either recorded settlements, settled, or mediator decisions. For example, reinstatement was the outcome (or part of the outcome) in 136 cases; 1,687 cases incorporated a non-monetary type of outcome (e.g., a letter of apology, a reference to be given, property returned to the rightful owner, or promises of different behaviour etc.); and 4,434 cases had a settlement which included a monetary component.

- The following table illustrates, of those applications completed in the period, the percentage of files completed within the corresponding number of weeks:

Week 1 2 3 4 5 6 7 8 9 10 11 12

Completion rate (accumulative) 14% 21% 29% 36% 44% 51% 57% 63% 68% 72% 76% 79%

- Mediators participated in 537 seminars, talks or visits attended by approximately 7,500 people on either the Mediation Service or various topics covered under the ERA. Mediators continue to be involved in pro-active educational activities.

- Of Mediation Service client satisfaction surveys that were analysed over the period, 89% of clients who answered the survey were either satisfied or very satisfied with the Service’s overall handling of their issue.

- The Employment Relations Service has recently developed measures to analyse the outcome of applications that have been referred or directed to mediation from the Employment Relations Authority. From 1 August 2001 to 30 September 2001, 67 applications that had been referred or directed from the Authority were completed. Of the manner in which applications were primarily disposed, forty-three applications were settled, 12 were not settled, 2 were withdrawn, 5 were not proceeding and 2 involved a mediator decision.

Employment Relations Authority

- The Authority received 1,433 applications during the period - 57% in Auckland, 18% in Christchurch and 26% in Wellington.

- The table on the following page illustrates the main types of applications received.

Compliance 9.5%

Dispute 2.9%

Other 3.1%

Personal Grievance 56.2%

Recovery 21.8%

Injunction 2.6%

Penalty 3.7%

- The Authority completed 722 applications. The table below provides a breakdown of the manner in which the applications were disposed.

Determined 32.8%

Invest. Abandoned 10.1%

Remove to Court 1.1%

Transferred 0.8%

Withdrawn 55.1%

- During the period, the Authority referred or directed 593 applications to mediation.

Employment Tribunal

- During the period, there were 1,366 applications filed in the Employment Tribunal (and 94 applications re-opened). As expected, this is a significant reduction from the 4,083 applications filed in the October 1999 to September 2000 period.

- The Tribunal completed 3,143 applications, leaving 997 applications outstanding. This compares with 2,680 outstanding applications at 30 September 2000. Many of these applications are unlikely to proceed, however, because of inaction on the part of the applicant.

Employment Court

Under the Employment Relations Act:

- The Court received 78 applications under the Employment Relations Act - 47% in Auckland, 10% in Christchurch and 42% in Wellington.

- The 78 applications resulted in 80 application types. The percentages were:

Challenge - point of law or fact 15%

Challenge - seeking de novo 46%

Declaration - strike, lockout or picket 1%

Declaration whether employee 5%

Entry warrant to dwellinghouse 1%

Interim dec. - strike, lockout, picket 1%

Interim inj. - strikes, lockouts, picket 3%

Injunction - strikes, lockouts, picket 5%

Proceedings removed in full from ERA 13%

Proceedings removed in part from ERA 1%

Review 4%

Referral of question of law from ERA 3%

Special leave to remove authority proceedings 3%

- 40 applications made under the Employment Relations Act were completed by the Employment Court - 20 were judgments, 18 were withdrawn and 2 were administrative withdrawals.

- The 20 judgments issued involved 21 application types. Of these application types, only 5 judgments were issued for a de novo hearing application. Three judgments upheld the Authority’s determination and two went against the Authority.

- At the end of the period, there were 38 applications outstanding and there were 5 outstanding appeals to the Court of Appeal.

Under the Employment Contracts Act:

- The Court received 177 applications under the ECA. Additionally, 12 files were re-opened. Of the main types of applications received, appeals against decisions of the Employment Tribunal accounted for 55% and damages 22%.

- During the period, 276 applications were completed. Withdrawals and administrative withdrawals accounted for 49% and 4% respectively; 46% of completed applications were judgments.

- At the end of the period, 244 applications were outstanding and there were 26 outstanding appeals to the Court of Appeal. As with many applications currently outstanding with the Tribunal, a number of these applications are unlikely to proceed because of inaction on the part of the applicant.

Registrar of Unions

- The Registrar of Unions received 166 applications for union registration as at 30 September 2001 and registered 159 unions. In most instances, for those societies not yet registered as a union, the Registrar is awaiting further information before proceeding with the applications. The annual return of members was completed at the beginning of June and membership numbers were obtained from 121 unions registered as at 1 March 2001. Union membership totalled 319,660 employees, representing 22.1% of wage and salary earners, and 17.7% of the total employed labour force. A recent study by Raymond Harbridge reported union membership figures as at 31 December 2000 to be 318,519, an increase of 16,114 (5.3%) over the course of a year. The figures produced by the Registrar of Unions equate to an increase of 1,141 (0.36%) in the 2 months following this study, confirming the upward trend in union membership.

- The past 12 months has seen an emergence of new, enterprise-based unions with their coverage being limited to a specific workplace. As of 1 March 2001, new unions made up 28% of registered unions while their combined membership accounted for less than 1% of total union members.

- The office of the Registrar of Unions conducted a client satisfaction survey over the period from December 2000 to May 2001. The questionnaire was sent to 136 persons who had recently had dealings with the RoU Office and 82 (60%) responded. The survey found that 84% of respondents were either “satisfied” or “very satisfied” with the registration process overall.

- On 24 September 2001, the Court of Appeal released its decision in the case of New Zealand Employers’ Federation (NZEF) v National Union Of Public Employees (NUPE) & Ors (CA 32/01). The question before the Court was whether the registration of NUPE (and other unions) by the Registrar of Unions under the Employment Relations Act 2000 prior to the commencement date of the Act, was validly done. In a majority decision (3/2) the Court allowed the NZEF appeal, quashing an earlier Employment Court decision and declaring that NUPE was not properly registered as a union under the ERA so that its status as a union - and that of 39 other bodies who applied for or were registered at the same time - was of no legal force or effect. The Government has introduced a bill that will validate the original registration decisions, and restore the status quo that applied before the Court’s decision. (For a more detailed summary of the decision, please see the below section entitled Cases.)

- Of the 40 unions that were affected by the NUPE Court of Appeal decision, 27 applied to be re-registered in September and early October, and 26 were re-registered. In addition, two of the affected unions had re-registered prior to the Court of Appeal’s decision.

Bargaining Outcomes

- As at 30 September 2001, 9,055 contracts/agreements had been lodged with the Department and 9,021 contracts/agreements covering 1,723,403 employees had been analysed.

- As at 30 September 2001, there were 2,094 active contracts/agreements covering 383,869 employees. This represents 21.1% of the employed labour force in New Zealand This percentage has fluctuated very little since October 2000.

- Of the 2,094 active contracts/agreements, 366 are agreements (covering 65,013 employees) made under the ERA and 1,728 are contracts (covering 318,777 employees) made under the ECA.

- Of the 366 collective agreements negotiated under the ERA that have been filed with the Employment Relations Service, 8 were negotiated by unions that had existed prior to the Employment Relations Act coming into force.

- Annualised base wage rate movements have changed from 1.77% in the quarter ending 30 June 2000 to 2.34% in the quarter ending 30 September 2001.

- When weighted for employee coverage, the base wage rate movement has fluctuated from 1.9% in the quarter ending 30 June 2000 to 1.7% in the quarter ending 30 September 2001.

- Between 1 January 2001 and 30 September 2001, 54% of employees in 81% of contracts/agreements have had an increase in their base wage rates. This compares with 85% of employees (77% of contracts/agreements) over the full year in 2000. In 1999, 78% of employees (67% of contracts) had an increase in their base wage rate movements. The most common increase in 2001 to date is between 2% and 4% (50% of contracts/agreements covering 30% of employees).

- In the year 2001 as of 30 September, 19% of contracts/agreements covering 46% of employees had a nil pay movement. In 2000, 23% of contracts/agreements covering 15% of employees had a nil wage movement.

Work Stoppages

- In the March 2001 quarter, there were 8 work stoppages involving 949 employees, totalling 6,206 person-days lost. This compares with 5 stoppages during the December quarter involving 209 employees totalling 441 person-days lost. From October 2000 to the end of March 2001, there have been 13 work stoppages. This compares with 15 work stoppages under the ECA during the equivalent six month period of the previous year.

- The work stoppage figures for the June 2001 quarter will be released by Statistics on 17 October. Evidence would indicated that there was approximately the same number of work stoppages in the June quarter as in the March quarter although involving more employees. Anecdotal evidence suggests, however, that a number of stoppages have been averted through mediation.

Cases

July 2001 to September 2001 Quarter

New Zealand Employers’ Federation (NZEF) v National Union of Public Employees (NUPE) & Ors (Court of Appeal)

- On 24 September 2001, the Court of Appeal released its judgment on the above case, regarding whether the registration of NUPE (and any other unions) by the Registrar of Unions under the Employment Relations Act 2000 (ERA) prior to the commencement date of the Act, 2 October 2000, was “necessary or desirable” in terms of s11 of the Interpretation Act 1999. In a majority the Court allowed the appeal, quashed the earlier Employment Court decision of 13 February 2001, and granted the declaration sought by the NZ Employers’ Federation that NUPE was not properly registered as a union within the meaning of the ERA and that its status as a union was of no legal force or effect. Thus the strike action taken by NUPE earlier this year in its dispute with the Ministry of Agriculture and Forestry was unlawful.

- The legal issues before the Court turned on the interpretation of s11 of the Interpretation Act 1999, which provides a limited exception to the rule that an enactment has no effect prior to its date of commencement. Section 11 reads, inter alia:

11. Exercise of powers between passing and commencement of legislation---

(1) A power conferred by an enactment may be exercised before the enactment comes into force or takes effect to---

(a) Make a regulation or rule or other instrument; or

(b) Serve a notice or document; or

(c) Appoint a person to an office or position; or

(d) Establish a body of persons; or

(e) Do any other act or thing for the purposes of an enactment.

(2) The power may be exercised only if the exercise of the power is necessary or desirable to bring, or in connection with bringing, an enactment into operation.

- In its decision of 13 February 2001, the Employment Court found that, in connection with bringing the ERA into operation, it was necessary that any society desiring to be registered as a union by 2 October 2000 should be able to secure registration that day. It was therefore necessary (or at least desirable) to receive applications for processing prior to that day. And, if applications could be lodged in advance of 2 October 2000, it was unrealistic and unnecessary to separate registration from processing as the former flows from the latter and the Registrar of Unions had no discretion in registering a union provided they met the criteria for registration.

- The majority of the Court of Appeal took, however, a different and narrower view of what is permitted by section 11, making a clear distinction between the actions of the Executive in readying the administrative machinery of the ERA and actions taken by others, including employee associations, once the Act comes into force. Thus, in terms of s11(1)(a) and 11(1)(c) it was necessary or desirable to make regulations and to appoint the Registrar, so that they would be in place when the Act came into force on 2 October. However, in terms of whether prior registration of unions under the ERA is, under s11(1)(e), desirable to bring, or in connection with bringing the ERA into operation, the Court has found that registration is dependent on the existence of an application by an employee organisation which satisfies the requirements of ss13 and 14 of the ERA (which did not come into force until 2 October) and is made in the prescribed manner in terms of regulations made under the Act (which themselves did not come into force until 2 October). Until these are in operation and satisfied, no registration under s15 of the ERA can occur.

- Further, the Court found, in short, ss13, 14 and 15 of the ERA require that the employee organisation have the legal status for registration as a union both at the time it applies for registration and at the time it is registered, and there is no power which the Registrar could exercise until the ERA came into force. Accordingly, s11 of the Interpretation Act did not apply, as the actions necessary to register a body as a union could only be taken once the ERA was in force, and registration actions themselves could not be said to be directed to bringing the ERA into operation. The transitional provisions of the Act provided for the continuation of employment contracts in force and a process for the initiation of new bargaining. There was no immediate need for unions to be registered immediately; the registration of unions shortly before the ERA came into force was therefore neither necessary nor desirable to bring the Act into operation.

Darryl Vaughan v Canterbury Spinners Limited (Employment Court)

- The Employment Court released its decision in Darryl Vaughan v Canterbury Spinners Limited on 26 July 2001. The case challenged a decision of the Employment Relations Authority which concluded that it did not have the jurisdiction to determine what redundancy compensation the respondent, Canterbury Spinners Limited, should pay the applicant pursuant to a contractual provision for the negotiation of such compensation. The Court found that the Authority has the jurisdiction to determine the level of compensation payable to the plaintiff, giving the Authority powers to determine and fix new terms and conditions on agreement. This is despite the express prohibition of section 161 of the Employment Relations Act (“the Act”).

- The applicant, Darryl Vaughan, made an application to the Employment Relations Authority, under section 129 of the Act, on 18 December 2000 against his former employer, Canterbury Spinners Limited (the respondent), to resolve a dispute over the interpretation of a redundancy clause. The contract in question was shown to expire on 25 August 2000, from which time the applicant would have been covered by an individual employment contract based on the expired employment contract. The applicant lost his job as part of a redundancy process.

- The applicant and his union were not able to secure an agreement related to the redundancy clause in the then contact. In particular the dispute related to subclause (d) of the redundancy clause (clause 28), which read:

The employer shall negotiate a level of redundancy compensation to be paid to employees to be made redundant (with the employees’ representative), which shall involved the employer making an offer of redundancy compensation to the employees to be made redundant.

The applicant requested that the Authority:

Determine of (sic) the level of redundancy compensation to be paid under clause 28 (d) of the applicable employment contract pursuant to section 161 (1)(a) of the Employment Relations Act 2000.

The respondent contested the Authority’s jurisdiction to be able to make such a determination in accordance with section 161 (2) of the Act. It reads:

Except as provided in subsection (1)(d) or subsection (1)(f), the Authority does not have jurisdiction to make a determination about any matter relating to-

(a) bargaining; or

(b) the fixing of new terms and conditions of employment.

The respondent referred to an object in section 101 (d) of the Act as being:

to ensure that the role of the Authority and the Court in resolving employment relationship problems is to determine the rights and obligations of the parties rather than to fix terms and conditions of employment.

- As the matter was raised at the directions conference, the respondent referred to section 46 (2) of the Employment Contracts Act (ECA). The respondent submitted that section 46 of the ECA was not replicated by the Act. However, in making reference to commentary in Mazengarb’s Employment Law, put forward the argument that although there is no counterpart to section 46 in the Act, the effect of sections 101 and 161 in the Act exists to prevent the Authority from making determinations in the circumstances previously prohibited by section 46 of the ECA. The respondent submitted that were the Authority to determine a level of redundancy compensation as requested by the applicant, it would be in fact determining a matter that related to both bargaining and the fixing of new terms and conditions of employment.

- The applicant quoted commentary from Brookers Employment Law which contends that, unlike the provisions of section 46 of the ECA, no such limitations apply under the ERA, and accordingly the Authority is given unlimited powers to issue determinations in such matters. Accordingly, the case law that existed prior to the ECA could be used in respect of the Act in order to provide for the setting of redundancy compensation levels, particularly Timbercraft Industries Ltd v Otago and Southland Federated Furniture. If the Authority were to set a level of redundancy compensation, it would not amount to a new term or condition as the clause relating to the redundancy process was an existing term. Simply following through would not a process under existing terms would not amount to the setting of a new condition.

- The Authority determined in favour of the respondent, stating that the philosophy of the Act is to promote and maintain a “living, equal, and direct relationship between the employer and the employee”. The Authority determined that the authors of Mazengarb are correct and that the effect of sections 101 and 161 of the Act amount to the same restrictions that existed under section 46 of the ECA. The Authority ruled that the setting of a redundancy compensation amounts to the fixing of “new terms and conditions of employment”.

- In the Employment Court’s decision, it stated that the essential issue between the parties involved whether there were provisions in the Act that had a similar effect to section 46 of the ECA. The representatives of both the respondent and applicant relied on Mazengarb and Brookers respectively, with the respondent’s representative suggesting that fixing a level of redundancy compensation would be fixing a new term and condition to the contract, as no formula previously was provided for in the contact.

- The Court, however, favoured the applicant’s submission as they effectively followed the reasoning of the Court of Appeal in Timbercraft. The relevant clauses of this Court of Appeal ruling stated in relation to clauses similar to the one in question:

It does not provide for any addition to or variation of the award. It provides for a particular course of action to follow from a particular event. Resort to the dispute of rights procedure pursuant to it is not for the purpose of introducing a new matter or of securing a redundancy agreement: it is to establish the rights of the workers under such an agreement. A dispute as to that is plainly one as to the application or operation of the award.

- The Court held that the Timbercraft ruling mirrors what exists in section 101 (d) of the current Act, which stresses the role of the Authority and Court to determine the rights and obligations of the parties under an agreement. The clause in the contract (28 (d)), the Court held, had not been changed in any way or a new provision put in its place and would remain in force unchanged after the dispute had been dealt with. It held that “the determination of rights and obligations arising from contractual provisions which have already been negotiated or bargained for by the parties does not involve the Authority in making a determination about any matter relating to bargaining.” The Court found, therefore, a new term and condition was not imposed as it was already provided for by the contract. Section 161 (2) (a) does not impose a restriction on the Authority, which will now be require to make a determination as to the level of compensation payable to the plaintiff under the relevant contractual provision.

ENDS


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