Welcome to Bartlett Law’s Crystal Ball. 2016 is shaping up to be an important year in employment law. There is new employment standards legislation which affects employment agreements (the impetus for the legislation was concerns about “zero hours” contracts), and we have the Health and Safety at Work Act 2015.
In this issue we summarise key provisions in the employment standards legislation, and in “Top Tips” we highlight areas to check for compliance with the Health and Safety at Work Act.
We also take a look at several interesting employment law cases (yes – there are such things!), focusing on how to run an employment investigation and awards against employees for wrongly taking employers’ data and breaching restraint of trade provisions.
IN THE SPOTLIGHT
Important changes to employment legislation
On 1 April 2016 new legislation came into force that applies to Acts including the Wages Protection Act 1983, the Parental Leave and Employment Protection Act 1987 and the Employment Relations Act 2000.
Here are some of the significant changes. Employers and employees may need to check their employment agreements for compliance with the new legislation.
Wages Protection Act changes
If an employer wants to make a deduction from an employee’s pay under a general deductions provision in the employment agreement the deductions must be reasonable and the employer must first consult with the employee.
Parental leave changes
More people will be eligible for parental leave payments, including those who have worked for different employers before taking parental leave, self-employed people, and casual seasonal workers.
There is a new concept of a “primary carer” for a child. It includes the biological mother, her spouse or any other person if they are the primary carer for the child (including adoptive parents, whāngai or Home for Life carers). “Maternity leave” entitlements are now called “primary carer’s leave” entitlements.
There are new six and 12-month employment tests to determine eligibility for unpaid parental leave. There are “keeping in touch days” to allow employees to work for up to 40 hours during parental leave without affecting parental leave payments.
Government payments for parental leave are available for up to 18 weeks and longer for premature births.
Employment Relations Act 2000 changes
Wage and time records
An employer’s obligation to keep written wages, time and leave records has been strengthened. Records must be kept in sufficient detail to show the employer has complied with minimum entitlement provisions (provisions under the Holidays Act, the Minimum Wage Act and the Wages Protection Act.) This will include records of overtime.
Agreed days and hours of work
Agreed hours of work must be specified in the employee’s written employment agreement. This includes recording the number of any guaranteed hours of work, days of the week when the work will be performed, work start and finish times, and any flexibility in work days or start and finish times.
“Availability provisions” are provisions which depend on the employer making work available and which require the employee to be available to accept that work.
The new legislation is not intended to prohibit or restrict the use of genuine casual employment agreements where the employee is free to choose whether to accept or decline an offer of work.
By contrast, in an “availability provision” situation an employee has no such freedom of choice; he or she must always be available for work that the employer from time to time requests the employee to do.
An availability provision can only be in an employment agreement that already has agreed hours of work and includes, in those agreed hours, guaranteed hours of work. The availability provision will apply to extra hours an employee is required to be available on top of guaranteed hours.
Examples of availability provisions are obligations on employees to be available for overtime when needed or to travel outside work hours when requested.
An availability provision must be in the written terms of employment or it will be unenforceable. It must be justifiable by genuine reasons based on reasonable grounds. The provision must provide reasonable compensation to the employee for making him or herself available. For a salaried employee the compensation may, by agreement, form part of the employee’s normal salary. For wage workers, there will need to be agreement as to availability payments.
Cancellation of shifts
Where an employment agreement provides for shift work, it has to include provisions for reasonable notice for cancelling the shift and for reasonable compensation if a shift is cancelled without the requisite notice. The notice period is to be determined by various factors (set out in the Act).
Secondary employment provisions
A “secondary employment provision” is one that prohibits or restricts an employee from performing work for another person, or prohibits or restricts an employee from performing work for another person without the employer’s consent.
Secondary employment provisions can only be in employment agreements if the employer has genuine reasons based on reasonable grounds for the provision, and those reasons are recorded in the employment agreement. A genuine reason might be one that relates to protecting an employer’s commercially sensitive information, protecting an employer’s intellectual property rights, protecting an employer’s commercial reputation, or preventing a real conflict of interest that cannot be managed without including such a provision.
The secondary employment provision must also be necessary having regard to the reasons for which it is included, and it cannot restrict an employee from performing secondary work to a greater extent than is necessary having regard to those reasons.
These requirements are not intended to affect the law regarding restraint of trade provisions.
When do these changes take effect?
For individual employment agreements entered into from 1 April 2016, the requirements for hours of work, availability provisions, cancellation of shifts and secondary employment provisions take effect from 1 April 2016.
For individual employment agreements already in force at 1 April 2016, those changes do not take effect until 1 April 2017. Existing individual employment agreements that do not comply with the new requirements will need to be updated between now and 31 March 2017.
(Some of the requirements for collective agreements are different from the above.)
There are now provisions that prevent officers and senior management from hiding behind a company structure where companies owe staff significant holiday pay or other minimum entitlements.
Labour inspectors can issue infringement notices where an employer has failed to comply with certain record-keeping provisions. The fee payable for an infringement offence is normally up to $1000, but can accumulate to $20,000 over a three-month period where there are multiple breaches (eg, the employer failed to keep adequate records for a number of employees).
The Employment Court now has power to award “pecuniary penalties” and other remedies against employers who are in serious breach of employment standards (such as failure to meet holiday pay obligations). This can be seen as a major step towards putting such breaches on the same legal footing as other commercially reprehensible misbehaviour (eg, under the Financial Markets Conduct Act and the Commerce Act – which also provide for pecuniary penalties).
Interesting employment cases
It’s all in the detail
Investigations into allegations of misconduct or serious misconduct must be comprehensive. Just how comprehensive is the subject of an Employment Court decision (under appeal to the Court of Appeal).
The case (H v A Ltd) concerns an allegation of sexual harassment.
Mr H was a pilot of A Ltd. He was dismissed after a complaint by Ms C that he had sexually harassed her while on a tour of duty to a Pacific destination.
Mr Pearce, Fleet Manager, investigated on behalf of the employer. He interviewed the crew, Ms C and Mr H. Mr H denied sexually harassing Ms C, and Mr Pearce was faced with differing views of what had happened. He concluded that Mr H’s behaviour towards Ms C was uninvited, unwelcome, offensive and was sexual harassment, and he had breached the company Code of Conduct.
After a disciplinary process, including Mr H saying counselling or therapy would be appropriate as an alternative to dismissal, Mr H was dismissed. Mr H challenged this and his case went to the Employment Court.
The Court carefully considered the investigation, particularly whether Mr H’s explanations were properly investigated. It found they were not. The Court criticised these aspects of the investigation:
- Different methods were used to record information. Only the interviews with Mr H were recorded and transcribed, for others only notes were taken.
- Two key interviews were done by telephone, and there was insufficient questioning on key points. The Court said interviewing by telephone did not facilitate the “very careful questioning which was required, and assessment of credibility”.
- The investigator did not consider the full context in which Ms C raised her complaint and whether she was influenced by the reaction of colleagues.
- The investigator did not delve into sufficient detail of the parties’ explanations about what actually happened, eg, the complainant was not asked about some of the accused’s descriptions of what happened. Inconsistencies in evidence were not properly tested.
- The investigator reached conclusions despite apparently differing accounts, without explaining why he reached those conclusions.
Textbook example of an investigation
In Goel v Director-General for Primary Industries the Employment Court found the investigation into potential serious misconduct by Mr Goel in not following a lawful and reasonable instruction was a “textbook example” of how a disciplinary investigation should be carried out:
- The investigator was independent – he had no prior knowledge of the alleged incident.
- After receiving the terms of reference, the investigator worked out what needed to be decided and who needed to be spoken to.
- The investigator prepared open-ended questions that would not bias the investigation.
- He asked Mr Goel who else he should talk to and discussed the process with him.
- The investigator met with Mr Goel in a neutral area, having previously confirmed the meeting arrangements with him, in writing, reminding him he could bring a support person with him and obtain support and assistance through EAP Services.
- The investigator followed the same process for all interviews.
- He asked his open-ended questions and carefully recorded the responses.
- After each interview he sent the transcript to the interviewee to verify that the interview was correctly recorded.
- He drafted an investigation report and attached all the interview notes and sent it to Mr Goel for his response.
- The investigator took into account Mr Goel’s comments on the draft report and then finalised the report.
- He made factual findings and did not make any recommendations about the nature of disciplinary action, if any, to be taken against Mr Goel.
The final investigation report was sent to the decision maker who then decided to dismiss Mr Goel for serious misconduct, which the Court held was justified.
These cases show it is imperative to get every step of the investigation process right. The decision about who should carry out the investigation is important, and it could be prudent to have an independent investigator.
Breach of restraint of trade clauses and of duty of confidentiality
In 2015 several ex-employees were ordered to pay substantial financial damages to their former employers where they had left and set up in competition and wrongly taken confidential information for their new businesses.
In Nova Energy Ltd v Mitchell before Mr Mitchell resigned he copied Nova’s client list and rates onto a USB drive. He then set up a competing business and used the information on the USB stick to target Nova’s customers, particularly those without a recent contract or near the end of their contract.
The Employment Relations Authority found Mr Mitchell had breached his duty of fidelity but there was no valid restraint of trade agreement between Nova and Mr Mitchell. Despite this, the ERA ordered Mr Mitchell to pay damages of over $1 million covering seven years, based on the loss of customers to Nova. Mr Mitchell was also ordered to pay a penalty of $30,000 for breaches of his contractual obligations, and his new company was penalised for aiding and abetting breaches of his contractual obligations and ordered to pay $50,000.
In Tex Onsite v Hill Mr Hill was ordered to pay his former employer $110,000 after he set up a rival company and attracted a customer away. Mr Hill used a USB stick to copy Tex Onsite’s customer database, pricing and secret information, breaching the confidentiality clause in his employment agreement. He also breached the employment agreement provision that prevented him from soliciting Tex Onsite’s clients for six months after resignation, as he had convinced a client to leave Tex Onsite and use his new company instead.
With so many new laws, it isn’t easy to make predictions!
Gazing into our crystal ball, we see there is likely to be significant attention given to the new health and safety laws. WorkSafe New Zealand has indicated its focus will be on high risk areas, rather than low risk areas (such as schools). That does not however diminish the need for organisations (PCBUs) to understand and apply the new laws. Arguably the actual day-to-day obligations (such as to ensure, so far as is “reasonably practicable”, worker health and safety while they are at work) have not changed a lot, but what has changed is the focus is on avoiding risks in the first place, rather than managing actual hazards. It is perhaps a matter of prevention rather than cure. There is also a greater focus on officers of PCBUs and their due diligence obligations.
Employers and employees will also need to come to grips with the legislation changes applying to agreed hours of work, availability provisions, secondary employment etc. New employees must have complaint employment agreements. Between now and 31 March 2017 employers should also check and if necessary update employment agreements for employees employed before 1 April 2016.
TOP TIPS … FOR COMPLIANCE WITH THE HEALTH AND SAFETY AT WORK ACT 2015
Employers should now have systems in place for compliance. Here’s a quick checklist:
- Have you identified who or what the PCBU is? (It is the PCBU that has the primary obligations under the Act.)
- Who are the officers of the PCBU (if any)? (Officers have due diligence obligations.)
- Do the officers understand their duties?
- Are the PCBU’s health and safety policies and procedures up to date?
- Has the PCBU checked if there are other PCBUs it needs to consult with regarding health and safety, and if needed, engaged in consultation?
- Has the PCBU identified all relevant workplace/s, and the workers in each workplace? (Workers often work in many different workplaces.)
- Has the PCBU done its risk analyses and assessments of health and safety risks and hazards?
- Are mechanisms in place to control hazards and risks?
- Is there a plan for worker participation on health and safety matters?
- Has the PCBU addressed contractor management?
- Does the PCBU have an up-to-date risk register?
- Does the PCBU have injury and emergency management processes?
- Does the PCBU know which of the new regulations applies to it, and is it complying with them? (New regulations came into force on 4 April 2016, including some that apply to all PCBUs, and others that are focused on particular activities or hazards (such as adventure activities).)
If your organisation needs help, let us know, as we can provide training and work with your organisation on a health and safety plan.
AND NOW FOR SOMETHING LIGHT
Note to employers: when making a long service award to an employee, check the employee has actually served the requisite number of years.
A city and water utility company in Spain was considering employee Joaquín García for a long service award for 20 years’ service.
It turned out that Mr García had collected his annual salary for the previous six years but hadn’t actually been at work!
When challenged about his lengthy absence, Mr García said he had visited his office but there was nothing for him to do. He blamed his manager for not ensuring he showed up.
Not surprisingly, the Spanish court didn’t accept this and ordered Mr García to pay back part (but not all!) of the wages he had collected over the six-year period.