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Employment Relations Law Reform Bill - Summary

Hon Margaret Wilson
Minister of Labour

The Employment Relations Law Reform Bill

Summary of Changes
This is a plain language summary of the key amendments likely to be of public and media interest.

The amendments are about fair employment law, about resolving disputes without lawyers if possible, about giving employees a genuine choice between individual and collective employment agreements, and about creating more certainty about what happens to employees when a business is sold or their work is contracted out.

Claims that the amendments are about compulsory unionism, national awards or compulsory arbitration are wrong.

Protecting employees when a business is sold or when their work is contracted out

This is about providing more certainty about what happens to employees when a business or part of a business changes hands. Many countries require the new owner to take on existing employees on the same terms and conditions. No such general requirement is proposed here.

However, all employment agreements will be required to address what processes would be followed if a business was sold or work contracted out. This does not guarantee transfer to the new employer or entitlements such as redundancy, but encourages employers and employees to think about the situation before it arises.

There will be additional protections for employees categorised as vulnerable under the Act. These people work in certain sectors where businesses change hands often, and employees often find themselves with a new boss but on less pay and worse conditions. These people are low-paid and have little bargaining power.

Vulnerable employees
These most vulnerable employees will be given the right to transfer on the same terms and conditions, and they will at least have the chance to make a case for redundancy if their new employer lays them off.

The sectors that have been identified are:


Cleaning services or food services
Laundry services or orderly services for the age related residential care sector
Laundry services for the education and health sectors
Orderly services for the health sector
Caretaking for the education sector

Genuine Choice But No Free Ride

Employees should have a genuine choice between individual and collective employment agreements and everyone should have "real" negotiations with their employer. It is proposed to make it easier for employees to be part of a collective and to bring negotiations for a collective to a conclusion, unless there is a genuine reason that they should not. These provisions include:

All union members, not just those covered by collective agreements can arrange to have their fees deducted from their wages;
It will be a breach of good faith for an employer to advise employees against collective bargaining or joining a collective agreement;
Employees can authorise their representatives to sign off on an agreement without having to have a ratification vote;
If employees are interested in a multi-employer collective, the relevant employers or their representatives have to attend at least one meeting to talk about it. Unfortunately, some employers completely ignore such requests.

Free-riding
It will be a breach of good faith for employers to intentionally seek to undermine a collective agreement by passing on the terms and conditions of a collective agreement to employees on individual agreements. "Free riding" is unfair to union members who do the hard work of negotiating and it's unfair to people on individual agreements because they miss out on having genuine negotiations.
Terms and conditions can be passed on if employers, employees and their union agree to it.

Protecting patients, staff and the public

The Minister of Health will establish a code of employment practice for the Health sector. This will provide for the health and safety of patients, staff and the public during industrial action in the health sector. A breach of the code by any parties covered by it will be a breach of good faith.

Good faith applies to all and "bad faith" to none

The Act's good faith provisions will be strengthened by making it clear that "good faith" means more than the common law obligations of mutual trust and confidence, and that this fair dealing also applies to people on individual employment agreements. It will be made more explicit that when anyone starts a job, they should be able to see the proposed employment agreement, have the chance to get advice and get a response to any questions.

The existing financial penalties in the Act (up to $5000 for an individual and $10,000 for an organisation) will now apply to breaches of good faith. In situations where an employer's bad behaviour has effectively sabotaged their employees' collective employment agreement and the only effective remedy is to set the terms and conditions of the agreement, the Employment Relations Authority will be empowered to do this. The basic idea is that unfair dealing should not pay.

Fine-tuning mediation and combating the "grievance industry"

The very successful free Mediation Services created under the ERA will be fine-tuned. Employees and employers should try to sort out problems between them before they go into mediation. It will be made clear that Mediation Services are available to people who are not strictly in employment situations, such as contractors, on a voluntary basis. Mediators will be able to "fast track" minor or straightforward problems.

Unnecessary legal action, inflated monetary claims and the collection of contingency fees by representatives will be discouraged. Any settlement money will normally be paid to the applicant, not their representative. Parties will not be able to take issues to the Employment Court while their case is still before the Employment Relations Authority (this doesn't prevent the Authority from seeking guidance from the court on a point of law).

Objective legal test in personal grievances.

The personal grievance provisions of the Act will be changed to make it clear that the legal test, when deciding whether actions or dismissals are justified, should be an objective test - ie what would a fair and reasonable employer do in the situation. Employers will have to consider and balance the legitimate interests of both the employer and the employee.

This change is being made because case law has been widely interpreted to mean that only the employers' perspective counts.

Equal Pay with Good Faith

The Equal Pay Act 1972 will be updated. It's long been the case that, all other factors being equal, men and women who do the same job within an organisation (or under the same collective agreement) are entitled to the same pay. The new legislation affirms this and requires employers to respond in good faith to equal pay queries.

Employees and employers will be able to ask Labour Inspectors to investigate queries in confidence, and it will be the Labour Inspector who takes a case to the Employment Relations Authority if it looks like discrimination has occurred. If discrimination is proved, the employee may get back pay and the employer may be penalised.

This provision is about getting the same rate of pay for the same job, not about equal pay for work of equal value (pay equity).

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