New Zealanders delivered an overwhelming message in the election on 8 November that it is time for change – not only change of government but also change of policy, with particular emphasis on the economy. Central to the economy will be employment relations policy.
Before the election, National gave assurances that, if elected, it would retain the core provisions of the Employment Relations Act 2000 (ERA). However, it will be interesting to see how far National-led Government may look to move beyond its published employment relations policy now that it has been successful winning coalition partners.
The employment policy which attracted most media coverage before the election related to National’s proposal to introduce 90-day trial period for new employees in businesses with fewer than 20 staff. These trial periods (to be by agreement between employer and employee), would allow the employer to terminate the employment relationship during trial period without the employee being entitled to bring personal grievance alleging unjustified dismissal.
National has indicated that the good faith provisions of the ERA would continue to apply during the trial period, as would sick leave, holiday provisions and health and safety law.
The precise details of how these trial periods will work in practice and which claims will and will not be prohibited are yet to be published. However, the experience in other jurisdictions which have similar “grievance free” period is that this simply encourages creative ways of trying to get around any bar on bringing claim. For example, it is common in the United Kingdom for claims to be brought alleging unlawful discrimination or some other breach of legal obligation (however vague or tenuous) that is not dependent on minimum period of service, where length of service might otherwise be an issue.
Another policy announced by National involves giving employees the option of participating in collective bargaining without having first to belong to union. This makes some sense in difficult economic climate, particularly if it enables employers to bargain with parts of their workforce more efficiently. It also gives employees the choice to organise themselves and bargain collectively, but to do so directly with their employer instead of via union. This worked well in many organisations for almost decade under the Employment Contracts Act 1991. It will be interesting to see whether new legislation will provide options for parties to consolidate or otherwise streamline bargaining processes where various union and non-union bargaining groups are involved.
National also announced proposal to allow employees to decide to “cash up” their fourth week of annual leave. While this certainly promotes freedom of choice, the policy has been opposed by some parties on the grounds that there is health and safety aspect to having minimum period each year of rest and relaxation and the cash may prove too tempting for less well-paid workers at the expense of their health and family time.
National’s other significant pre-election employment policy related to its planned changes to KiwiSaver. National will reduce the compulsory employer contribution from projected maximum of four percent to two percent (also reducing the minimum level of employee contributions to two percent) and will remove the employer tax credit altogether. It will also repeal the amendments to the ERA which the last government introduced in September 2008, which effectively required employers to pay employees who signed up to KiwiSaver more than their colleagues who did not.
Whether National will look to make more fundamental employment reforms during this first term depends partly on the demands of its partners in Government, ACT in particular.
ACT would repeal the ERA, believing it destroys jobs and has created “special privileges” for union officials to the detriment of the freedom of employers and employees to contract as they wish. Clearly with National committed to retaining the framework of the Employment Relations Act, this is highly unlikely to happen. Still, it remains to be seen whether ACT can win some concessions for wider-ranging review of employment legislation as part of any deal.
However, much of the forthcoming employment relations policy is likely to depend on how the economy fares. Steering course between helping businesses to survive (and hopefully thrive), while also maintaining stability in the job market and keeping the ship “steady as she goes” during these uncertain times will be difficult.
Steve Wragg is senior associate at Minter Ellison.
