Employment Standards Legislation – 1 April 2016

From 1 April 2016, the Employment Standards Legislation Act took effect.  This Act was designed to strengthen the observation of minimum standards in employment law.  

Although the Act is directed at employers that do not have a good compliance history, it does contain some significant changes for all employers to take note of, and it is a good prompt for a business-wide review of your employment processes.  It will have a significant impact for employers who use part time and casual workers, or whose workers do not work on a regular pattern.  

Hours of Work

Perhaps the most significant changes are around the hours of work.  Traditionally, hours of work clauses have not been given much attention – salaried employees are expected to work as much as necessary to complete the job, and waged employees work on whatever basis is agreed – until all the customers go home, until all the work is finished, or according to a roster that is circulated from time to time.

An employee is now entitled to a guaranteed minimum number of hours per week.  Above that, the Act requires the basis on which hours of work are set to be expressly agreed between the employer or employee.  If you have not done so already, you should check your employment agreement to ensure:

• Where possible, it sets out exactly how many hours the employee works, what days they work, and the employee’s start and finish times. 
• Where it is not possible, it is precise as it can be about how the employee’s hours of work are determined;
• The employee expressly agrees to the mechanism for determining his or her hours.  

Where the employee might be required to work additional hours, they must be adequately compensated.  It is sufficient to agree that the remuneration package is set to take into account the likelihood they will work additional hours, but this is unlikely to be acceptable if the employee is on a very low salary. 

The Act also addresses some common (but often not well-considered) employment agreement provisions, including:

• Providing that employers may not require an employee to be available for work, unless the employer’s requirement is on reasonable grounds and employees are adequately compensated.  So for example, a shop assistant might be scheduled on reserve in case a busy day eventuates, but they may be required to be paid a standby allowance for agreeing to be available in those circumstances (because their activities will be restricted during the day)
• An employee’s shift may not be cancelled without reasonable notice, or reasonable compensation.  It is for the employer and employee to agree what might be reasonable notice and compensation.  If there is no agreement on compensation, then the employee must be paid what they would have been paid for the shift.  So, if you have rostered workers, your employment agreement needs to contain a provision defining reasonable notice for cancellations, and what the employee will be paid if they are stood down before a shift. 
• Restrictions on secondary employment are only allowed based on genuine grounds.  What are reasonable grounds relate to the security of the business’ information and reputation.  It is not clear whether common ‘health and safety’ grounds will be sufficient basis to prevent secondary employment.

Enforcement

The Act accompanies an upswing in enforcement action by the Ministry of Business Innovation and Employment, which has been observable over the last five years.  The Ministry is now actively pursuing prosecutions of companies who have not complied with minimum standards around pay and holidays.

The Ministry is now able to issue infringement notices for breaches (the employment law equivalent of a speeding ticket), with a fine of $1000 or more.  This is accompanied by increased record keeping obligations, in particular an obligation to keep a record of an employee’s daily hours, and what is paid for those hours.  It will be particularly important to review your record keeping if your employees are paid by piece rate, or with particular allowances for work or scheduling reasons, or production bonuses.

At the extreme end, there is now an enforcement regime which allows proceedings against officers of a company where they have knowingly and intentionally been involved in a breach.  

Action Points

• Now is a good time to review your employment agreements to ensure they comply with legislation.  
• Talk to your employees about how their hours of work are determined, and ensure you both agree on the method for doing so.  Write this down as a modification to their employment agreement (or incorporate it into the agreement for new employees)
• Check your record keeping and make sure that the system you use makes it easy to see hours worked, what an employee is paid for hours worked, how their holidays are calculated and paid.