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Employment law - the year that has been and the year ahead.

29 January 2013

As we hang up the togs and put away the sunhat to return to work from our summer breaks, it is timely to reflect on the year that has been and the year ahead. While 2012 was largely characterised by developments in case law, we can expect to see a number of legislative changes in 2013, with further progress on other areas of reform set for change in 2014.

2012 – The year in review
The main themes of 2012 were industrial action and the adjustments made by employers in response to the 2011 legislative changes.

Ports of Auckland disputes
One of the most well publicised employment disputes of 2012 was the ongoing battle between the Maritime Union and the Ports of Auckland. A number of decisions have arisen from that dispute, the most significant relating to MUNZ’s application for an interim injunction to restrain the Ports from contracting out the work of employees who were engaged in collective bargaining. The Union claimed that the decision to contract out the work arguably “undermined the bargaining process” in breach of the Employment Relations Act.

The Court agreed with MUNZ, finding that there was “a seriously arguable case that the actions of the defendant in allegedly threatening to and then deciding to contract out the work on which the union employees were engaged under the expired collective agreement whilst collective bargaining was on foot for a new collective agreement was likely to undermine and arguably had undermined the bargaining”.

This case illustrates that the duty not to “undermine bargaining” is more powerful than has previously been appreciated. Although we are yet to see how far the Court will take this duty, we are likely to see a greater use of arguments along these lines in the future.

The 2011 changes to the law
We also saw a number of cases in 2012 that shed light on the legislative changes made in 2011. The case of de Bruin v Canterbury District Health Board discussed the new test for reinstatement. In April 2011, reinstatement was removed as the primary remedy for a personal grievance and now ranks equally with other remedies. In the case, Mr de Bruin (a very experienced mental health nurse) was dismissed for slapping a difficult patient and kneeling on her to restrain her.

The Court noted that the test is now whether it is “reasonable and practicable” to reinstate. In assessing whether reinstatement was “practicable”, the Court considered whether there was any suggestion of animosity towards Mr de Bruin, incompatibility with staff or patients or of practical difficulty in reintegrating him into the workplace. In assessing “reasonableness”, the Court stated that a broad inquiry into the equities of the parties was required. In assessing these factors, the Court held that reinstatement was reasonable. We are seeing that, despite reinstatement no longer being the primary remedy, the frequency with which it is granted has not significantly reduced and, in today’s economy, it is arguably still the most valuable remedy available.

Although this case will be of limited relevance moving forward, Allen v C3 Limited has confirmed that reinstatement is still the primary remedy for unjustified dismissals occurring before 1 April 2011. This is something that employers who are facing historical claims for unjustified dismissal should be aware of.

Employer claims against employees
A trend that we saw continuing in 2012 was claims by employers against employees. In particular, in the case of Rooney Earthmoving Limited v McTague, an employer was awarded $4.29 million by the Court after three of its employees set up in competition in breach of their employment duties. Although the employees did not have restraints of trade, because they had taken substantial steps to set up in competition while still employed by Rooney Earthmoving, they were found to be in breach of their implied duties of fidelity, good faith, trust and confidence. This case illustrates the extent to which the Courts are prepared to give teeth to employee obligations toward their employers and reinforces that fact that implied obligations (although not expressly set out in an employment agreement) ought to be treated seriously by both parties.

Employers have increasingly sought to enforce restraints of trade as the economy picks up and employees are willing to risk their current roles and “make a move”.

In addition, the Authority and Courts in 2012 demonstrated an increasing willingness to give teeth to well drafted restrictive covenants, giving employers some comfort with regard to their ability to effectively protect their legitimate proprietary interests (such as client contacts and confidential information). In particular, the Employment Relations Authority enforced a three year non-competition restraint against an employee in Wilkinson Insurance Brokers Limited v David Allen and Meridian General Brokers Limited and a 12 month restraint in Taylors Floorcoverings and Furnishings Limited v Brown (in which we acted for the applicant). Both of these cases involved employees who had previously been owners of parts of the respective businesses, but the cases do give an indication of the Authority and Courts’ willingness to uphold reasonable restraints, even when it means putting the relevant employee out of work for the restraint period.

Part 6A of the Act
The case law of 2012 also provided us with some further clarity in terms of Part 6A of the Employment Relations Act (which enables “vulnerable” employees to transfer to new employers in restructuring situations). In SFWU v OCS, the Supreme Court held that where an employment agreement precludes any right to a particular form of redundancy entitlement, “transferring” employees may not bargain for that form of entitlement with a “new” employer who has made them redundant. However, they may bargain for another form of entitlement not expressly excluded by the employment agreement.

Furthermore, in LSG Sky Chefs v Pacific Flight Catering, the High Court provided some clarity to employers on the issue of who is liable for accrued entitlements in transfer situations under Part 6A. The Court held that when employees transfer to a new employer under Part 6A, this does not extinguish the original employer’s liability for the payment of accrued entitlements. Therefore, where the new employer has paid out such entitlements, the original employer is liable to reimburse the new employer for that amount.

2013 – The year ahead
So what developments in the employment law arena await those returning from their summer breaks? Well, 2013 looks to be a year of legislative change. In 2012, the Minister of Labour made two announcements regarding employment law changes that had been approved by Cabinet and were expected to be introduced into the legislative calendar in early 2013.

Given the changes in the labour portfolio in recent months (Simon Bridges has just been appointed as Minister following Kate Wilkinson’s removal from the position over the fallout from the Pike River Royal Commission report), there may be some delay in introducing these changes, but we can nonetheless expect that progress will be made in the following areas this year.

Changes to the collective bargaining regime
Changes to the collective bargaining regime were approved by Cabinet in May 2012. These changes aim to remove some of the obstacles that employers currently face when engaged in collective bargaining.

In particular, there will be a return to the original position where the duty of good faith does not require the parties to conclude a collective agreement. The Employment Relations Authority will also be empowered to declare in certain circumstances that collective bargaining has ended. We are, therefore, likely to see less protracted collective bargaining disputes, such as that of Ports of Auckland, as bargaining will simply be declared to be at an end in stalemate situations. In addition, employers will be allowed to opt out of multi-employer bargaining at the beginning of the bargaining process if they wish to do so, resulting in less time and administration being devoted to bargaining with unwilling employer parties.

A further welcome change for employers will be the removal of the “30-day rule” that forces non-union members to be employed under the terms and conditions of a collective agreement (where one is in force which covers their work) for the first 30 days of their employment. Employers will instead be able to employ non-union members on individual terms negotiated directly between the employer and employee from day one.

There will also be a change allowing for partial pay reductions in cases of partial strike action. The value of this proposed change in practice is likely to depend on whether any such pay reduction is measured purely on a “time lost” basis or whether employers are able to take account of the “quality” of the work not performed (meaning that it could be used in work to rule cases or cases where employees structure their work to cause maximum disturbance for minimum time off).

Part 6A of the Act
Another key area where we can expect to see further change is Part 6A. Although a number of employers have called for the provisions to be scrapped in their entirety, the Government has instead proposed a more moderate approach. Changes were approved by Cabinet in October 2012, which serve to tweak the legislation to address some of the more common issues.

The most significant change will be an exemption for small and medium sized businesses, removing the transfer obligations from businesses with fewer than 20 employees where they are the incoming employer. This is good news for smaller businesses (which may now be at an advantage in tender situations and will face less compliance costs). However, larger businesses may now be at a comparative disadvantage, particularly where the principal wishes to see fresh faces in the contracting workforce. Employee advocates have also argued that this removes the protection of the legislation from the most vulnerable of the vulnerable workers.

The introduction of a process to help employers agree on how to apportion liabilities for accrued service-related entitlements of employees who are transferring has also been approved by Cabinet. At present, although a new employer is required to take on the old employer’s annual and sick leave liability, the Act is silent as to who should bear the cost. As discussed above, late last year the High Court ruled that the old employer may be responsible for paying the amount of these accrued liabilities across to the new employer. It is likely that the new process will confirm that this is the case.

We will also be seeing some much needed administrative amendments, such as a requirement for the outgoing employer to forward individual employee information (such as PAYE records and employment agreements) to the incoming employer and a requirement that employees must decide to transfer to a new employer within 5 working days. Additional penalties and compliance orders for non-compliance with Part 6A will also be introduced, as will mechanisms to allow disputes between competing contractors to be resolved through the District Court (as the Employment Relations Authority does not have the jurisdiction to determine inter-contractor disputes).

These changes will not resolve all of the issues with Part 6A, but should at least provide clarity on some of the more difficult aspects of this legislation.

Flexible working
Cabinet has also approved the extension of the right to request flexible working to all employees, rather than the right being restricted to those with caregiving responsibilities. This opens the way for employees to seek flexible working arrangements (such as shortened days, working from home, job sharing or compacted weeks) for work/life balance reasons such as sporting commitments or travel to a weekend property. The permitted reasons for refusing a request are intended to remain wide, however, allowing employers considerable discretion in managing the flexibility of their workforces.

Changes have also been proposed to the process that employees need to follow to make a flexible working request, with much of the formality being removed from the process and a reduced one-month period within which employers must make a decision on any request.

Widespread changes in health and safety legislation
A Government-appointed Independent Taskforce on Workplace Health and Safety is currently assessing the performance of New Zealand’s health and safety framework. Of particular concern to the Government is the high rate of workplace injuries in New Zealand when compared with Australia and the United Kingdom. The Taskforce will be recommending practical measures to reduce rates of serious injury by 25% by 2020.

The Taskforce is expected to provide its final report to the Government in April 2013. The report will recommend a package of measures, which are likely to impose more onerous duties on company directors, employers, employees and contractors. It is expected that legislation will be introduced either later this year or in 2014 to adopt the Taskforce’s recommendations and to incorporate the recommendations flowing from the Pike River Royal Commission.

In the health and safety sphere, we can also expect to see a Court of Appeal judgment on the issue of health and safety inspectors’ powers this year. In the landmark 2011 decision of Bull v Utumapu, the High Court interpreted the Health and Safety in Employment Act 1992 in a way that limited a Labour Inspector’s powers to compel a company employer to provide someone to attend an in-person interview; narrowed the scope of questions an Inspector can ask; and required an Inspector to provide advance warning of the intended topics for questioning. The Ministry of Business, Innovation and Employment has appealed the decision, meaning that we should see a Court of Appeal judgment definitively dealing with these issues at some point this year.

Bringing the Privacy Act up to date
Changes can be expected to the Privacy Act 1993 this year after the Government announced in 2012 that the current Act will be repealed and redrafted. This announcement followed a Law Commission review that made 149 recommendations to update the Act. Although formal details of the new Act are yet to be released, recommendations for change largely focus on clarifying and strengthening the principles-based approach of the current Act, in addition to filling in the gaps in the law that have resulted from technological advances and changing attitudes about information sharing over the past 20 years.

Key recommendations include streamlining the privacy complaints system (with more certainty in those instances when a person asks to see the personal information a business holds about them), requiring mandatory notification by an agency if personal information is lost or seriously compromised, and modifying some exceptions to the information privacy principles to clarify that information can be passed to an appropriate person where, for example, there is a serious (but not necessarily imminent) threat to an individual’s health, or where criminal offending is suspected. The Government is considering the Law Commission’s recommendations and is expected to report back on these, along with more specific policy proposals this year.

“Mondayisation” of Waitangi and ANZAC days
The Holidays (Full Recognition of Waitangi Day & ANZAC Day) Amendment Bill is due for its second reading this year. The bill proposes to “mondayise” Waitangi day and ANZAC day, meaning that if either of those days fall on a Saturday or Sunday, which is not otherwise a working day for the employee, then the public holiday will be treated as falling on the following Monday.

The Transport and Industrial Relations Select Committee recommended that the Bill not be passed due to its negative effects outweighing its positive potential. The Select Committee does, however, have a National party majority and the Labour and Green Select Committee members released minority views in support of the legislation. If supported by all non-National and ACT MPs (as the Bill was in its first reading) then the Bill would be passed into legislation this year, although it would not have any practical effect until 2015 (being the next time that either Waitangi Day or ANZAC Day will fall on a weekend).

How can we help you?
If you would like to discuss any of the issues outlined above, please feel free to contact us. Otherwise, we hope that you have had a relaxed and enjoyable break over the festive season, and we will keep you updated as the law develops during the year.

Authors: Jennifer Mills, Megan Richards, Aaron Lloyd, Christie Hall, Emma Warden from Minter Ellison Rudd Watts.

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