July 2010 - Changes in the wind for Employment Law
The following articles were written by Graeme Riach:
Prime Minister John Key has just announced proposed changes to New Zealand employment law. The major talking points are the extension of the “grievance free” 90 day trial period to all employers and the removal of access as of right by unions to workplaces.
By way of background, in March last year the National Government introduced a change to the Employment Relations Act which allows some employers to have a “free look” at new employees. The amendment (s67A and (B)) permits staff to be taken on for a 90 day trial period and, provided notice is given before the expiry of that period, the employment can be terminated without the possibility of a personal grievance being faced by the employer.
There are some important things to note for employers seeking this protection:
At present it is only available to employers who employ 20 employees or less (including the new employee). This is of course seemingly about to change to universal application.
It does not apply to employees who have been employed by the employer before (so consecutive trial periods for the same employee cannot be utilised).
The employment agreement must contain an appropriately worded provision – that is it does not apply to all new employees – unless they have a suitable clause in their agreement.
The protection against grievances relates to unjustified dismissal claims only and does not prevent grievance in respect of unjustified disadvantage, sexual or other harassment, duress or discrimination.
The expressed policy behind the change is to give employers confidence to employ someone on trial, knowing that if they don’t work out, they will not be facing legal action. So employees who may, at first glance, appear of dubious worth can nevertheless be given a chance to prove themselves when this is unlikely to have happened otherwise. It also prevents employees (and there have been some…) from bringing unmeritorious grievances after lasting only a short time – in the hope that the employer will pay out just to make the case go away.
Evidence suggests that there has not been a negative response to the legislative change – in fact the contrary appears to be the case with many employees being taken on in circumstances where the employer has said they would not have employed without the statutory protection. Time will tell as to whether this change ultimately results in the desired benefits – but in the meantime employers should be aware of its existence and take the necessary step of reviewing their employment agreements to take advantage of the protection.
The removal of access as of right by unions to workplaces is likely to be as controversial as the grievance free trials. Unions rely on this access to meet and recruit members, whose existence would otherwise be unknown to them. They also conduct business with their members including collective bargaining and dealing with health and safety matters. The Government says that it is unnecessary and undesirable to disturb the employer’s right to control who is on its premises. The union must seek consent for access but the consent cannot be unreasonably withheld by the employer. So it remains to be seen whether in practice this will prove a major change.
Other less publicised but equally important changes proposed include:
Removing minor technical breaches in dismissal procedure as being grounds for a grievance and changing the test for justification to whether a reasonable employer “could” have dismissed in the circumstances as opposed to the current “would” have dismissed.
Removing the emphasis on reinstatement as a remedy by making it no longer the “primary remedy” to be adopted by an Authority or Court.
Emphasising mediation including a new “informal” mediation (without representatives for each party”.
Allowing employers to communicate more freely with their employees during collective bargaining.
Allowing employees to “cash up” one week of their holiday entitlement rather than take it as leave. Transfer of one statutory holiday can occur by agreement between employers and employees.
Employers may demand a medical certificate without waiting for three days (but may have to pay for the doctor’s visit.
A “Code of Practice” is to be developed for managing dismissals.
The amendments are likely to come into force (if passed into law) next year. We will keep our clients informed of developments as they occur.
May 2010 - Goodwill Hunting (Or Stealing)
A common dilemma facing business owners today is what to do when an employee leaves and sets up a competing business nearby. In some cases the employee has been with the business many years and built up significant relationships with clients of the business and there is a real risk that the clients will transfer their business to the new competitor.
In order to protect against that risk, employers must have a suitably worded restraint of trade or non-solicitation clause in the Employment Agreement. Without such a clause there is nothing in law preventing employees from setting up next door and “stealing” clients. In doing so, however, the ex-employee is not entitled to use confidential information gained during their employment to advance their own interests. That information can include client lists and information concerning client affairs as well as trade secrets.
Restraint of trade provisions are themselves unenforceable unless a Court decides the particular clause is reasonable. So if, for example, a clause seeks to prevent an employee from being involved in a competing business for a period of two years in the whole of New Zealand, it is likely to be struck down as too wide. The Court might substitute a narrower clause such as “six months in the greater Christchurch area” as being reasonable. Just what is reasonable depends on the circumstances, the type of employment and the interests that the employer is seeking to protect.
Non-solicitation clauses do not have to be limited in time or geographic location. These are clauses which prohibit the employee from contacting clients of the employer and actively encouraging the client to transfer their business to the new competitor. These clauses are much more likely to be upheld as a breach is likely to imply illicit use of the relationships formed by the employee while working for the employer’s business.
If you suspect that an employee is trading in breach of either of these types of provision, then evidence of the conduct must be obtained. This can include evidence from clients who have been contacted, advertising material, mail drops and such like. The Court (or Employment Relations Authority) can grant an injunction preventing the employee from continuing to trade in breach of the clause. Unless the clauses are in a signed written Agreement, however, you will be wasting your time. Accordingly, ensure from the outset that your Employment Agreements have the right provisions for the type of employment and protection that you need.
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