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The changing face of employment law under the new Government

15 November 2017


The nation is watching the Beehive, waiting to see what changes will emerge. It has been an exciting start for the new Government. Speaker of the House, Trevor Mallard, was shakily elected and Winston Peters served writs on National Party leadership before leaving for an overseas trip as Foreign Minister.

It seems that significant change is afoot in New Zealand. But what about employment law? What is going to change there?

Two significant pieces of legislation have changed employment law in recent years. The Employment Contracts Act completely liberalised employment law in 1990 and then the Employment Relations Act in 2000, introduced by Margaret Wilson, tipped the balance back the toward workers, but only so far.

National made a few changes to employment law during its three terms in office. Labour, however, has several significant reforms in the pipeline.

The minimum wage will go from $15.75 an hour to $16.50 shortly. The plan is to raise it to $20 an hour by 2020 which will be a large cumulative rise. Labour has also pledged to ensure all public sector employees will be paid the living wage, currently $20.20 an hour.

This change will be very welcome to workers on the minimum wage. The industry that will be most affected will probably be aged care, much of which is government-funded anyway.

Hospitality and farming will also be significantly affected. These industries are not funded by taxpayers and one of the impacts is bound to be the loss of some jobs and the risk of some businesses struggling to survive.

Ninety-day trial periods are being overhauled in an unusual way. New employees can still be placed on one, but they can challenge their dismissal. A new referee service will be established just to deal with these claims. A referee will hold a short hearing without lawyers and can decide to reinstate the employee to their position or award damages.

Back in the old days when the workforce was unionised, we had personal grievance hearings without lawyers. Parties were represented by unions and the Employers Association. However, that would not be the case today.

A very small percentage of the private sector is now unionised and employees who are not union members are unlikely to have anyone competent to assist them in disputes concerning 90-day trials.

Employers will often be represented by their human resources manager or chief executive, while a worker will not be able to have a lawyer present and may well struggle to compete with the professionals on the other side.

So a system that seeks to do rough justice may actually create injustice. The idea is well intentioned but may have unintended consequences which are unfair.

It would surely be easier to have trial-period claims heard like other personal grievances. This would maintain one system of justice for all in the employment jurisdiction, whether they have been employed for 90 days or 20 years. One way or another, the changes made to trial periods will affect all employers.

Changes to achieve pay equity will also have far-reaching effects.

Labour is doing away with the recent Pay Equity and Equal Pay Bill proposed by National. Labour wants to promote a system of comparison that is more generous to workers. The pay in a female-dominated industry could be compared with a male-dominated industry of a similar skill level. The details of the new pay equity scheme under Labour are yet to emerge.

Labour intends to implement a system of Fair Pay Agreements (FPAs) which will be agreed by businesses within an industry and the unions representing workers within that industry. These FPAs will set basic standards for pay and other employment conditions within an industry.

Labour's plan for FPAs is to create a framework for fair wage increases where good employers are not commercially disadvantaged for paying their workers a higher wage.

Whatever pay equity changes and fair pay agreements result, they will significantly impact employers.

Labour proposes to include statutory support and legal rights for "dependent contractors" who are effectively workers under the control of the employer but who do not receive the legal protections of employees. To give dependent contractors legal protection akin to that of employees, presumably a new category of worker would need to be established. A worker would then be either an employee, a dependent contractor, or an independent contractor.

It is already difficult to distinguish employees and contractors. Dividing contractors into two groups will add complexity. Many workers referred to as "contractors" are legally employees and are already entitled to the full protection of employment law. However in the majority of cases neither the employer nor employee realise the true legal status of the worker and without legal advice the worker will not know their actual entitlements.

Clearly there is need for change, particularly in certain industries. In the cleaning industry some workers are called contractors when anybody would believe they are employees. Often these individuals are migrant workers and their basic protections are denied by their employer calling them "contractors". It makes sense to protect these people.

However, in other industries, people really are contractors with the ability to work remotely and manage their own time. In the IT industry, many individuals consider themselves small business owners, wanting to manage operations without outside interference, even if they only work for one principal contractor.

Writing legislation to protect workers such as migrant cleaners, but not the independently-minded IT experts and others who benefit from contracting will prove a challenge.

The Government also has a number of less significant or immediate changes in the melting pot.

When legislation is introduced to Parliament there will no doubt be a number of submissions. With employment law legislation the devil is in the detail. Until we see the final product we simply won't know the extent of the changes. One thing is for sure, this government is a change government.


Cullen - The Employment Law Firm is one of only eleven law firms in New Zealand approved to provide employment law services to Government and the public sector.

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