Get the feeling it’s election year, anyone? The political football that is employment law has been tirelessly booted around Parliament this year, sparking significant media attention.
So far this year, changes that have taken effect include compulsory employer KiwiSaver contributions, and flexible working. The Government has also introduced legislation to Parliament providing for compulsory rest breaks, and breastfeeding in the workplace. On top of all that, the Government has announced stronger protections for casual and temporary workers, and public servants are to receive an extra week’s annual holidays. And the Government has even established working group which is looking at compulsory redundancy compensation.
A cynic would say that the Government knows it does not have time to get all these proposals through Parliament, even if it can command the necessary support. It might garner few extra votes in the process of trying, though.
Probationary periods National has largely carped around the edges, and has been very cagey about its own policies. However, recently it has grabbed the headlines by promising to bring in 90-day voluntary probationary period for new employees. This would apply to businesses with less than 20 employees, and would allow employers to dismiss new employee within 90 days, without the risk of an unjustified dismissal claim. The detail is unclear at this stage: for instance, whether the policy would affect various other personal grievance claims.
Current status of probationary periods Under the current law, employers and employees may agree to an initial probationary or trial period, provided it is recorded in the employment agreement.
However, the employer must still follow fair disciplinary or dismissal procedure: case law suggests that this is not as extensive as the procedure for longer serving employee, but probationary employee must still be warned of their inadequate performance and given chance to improve. Otherwise, the dismissal risks being unjustified.
Comment on probationary periods National’s policy has been bluntly criticised by the Labour party and trade unions. Helen Clark has labelled it as “completely daft”, and Trevor Mallard said it is “almost charter for people to abuse newly appointed, low wage workers”. Their argument is that strong rights for workers give security and fairness, and are an essential condition for lifting wages and living standards. With New Zealand currently entering difficult economic environment, many believe we should be strengthening employee rights and job security rather than eroding them with policies such as this.
However, National and employers argue that the proposed policy has many significant benefits for New Zealand. The most pertinent of these is the enhanced flexibility it will give to businesses with less than 20 staff, which according to the National Business Review, make up 33 percent of all businesses and account for 30 percent of all employees. It will encourage small businesses to take risk on workers they might otherwise be reluctant to employ, such as members of different demographic, mothers re-entering the workforce, former prisoners, or people with little work experience.
Small businesses have complained for many years that they face disproportionate burden in most areas of employment law. For many of these employers, the decision to hire someone brings with it financial risk which would be reduced by National’s proposal. It could persuade employers to recruit more freely, something that would benefit the economy as whole as the country descends into recessionary period.
One of the counter-arguments is that this proposal would be open to abuse. But as some commentators have pointed out, employers do not hire someone with the intention of firing them within 90 days. Recruitment is an expensive and time-consuming activity, as is training. There are significant skill shortages in New Zealand, and employers want the person they appoint to succeed.
A further point is that many developed nations already have limited rights for new employees. In the United Kingdom, for instance, no employee can claim unfair dismissal in the first year of their employment, unless they have been dismissed for an automatically unfair reason, such as having made disclosure under the UK’s whistle-blowing legislation.
This is not to say that similar regime would be good for New Zealand, but clearly some other jurisdictions are not as paternalistic in terms of employee protection during the initial period of employment.
Industrial relations policies continue to arouse excitement among politicians and the media, particularly in an election year. Of all the proposals announced this year, one of the most likely to be enacted is National’s policy on probationary periods. Given that this will only apply to businesses with 20 employees or less, and will be limited to 90 days, the impact of the change will not be nearly as significant as it could be. It makes you wonder whether all the fuss that’s been made about this is genuine, or more about making political capital.
Greg Cain is partner with law firm Minter Ellison Rudd Watts. Amy Cunningham is law clerk with the firm and is due to be admitted to the bar this month.
