Employment - Parry Field Lawyers

Are you an employee looking to take a period of parental leave or, alternatively, an employer who has an employee intending to do so? You may be wondering what your entitlement or obligations are.

In this article we consider an employer’s obligation to keep open an employee’s usual job until the end of the employee’s parental leave unless certain circumstances apply.

The Law

Under section 41 of the Parental Leave and Employment Protection Act 1987 (‘the Act’), when an employee takes a period of parental leave in excess of 4 weeks, the Employer is presumed to be able to keep open the employee’s usual job until the end of the employee’s parental leave.

This is unless the employer “proves” that the employee’s position cannot be kept open because:

a temporary replacement is not reasonably practicable due to the “key position” occupied by the employee within the employer’s enterprise; or
of the occurrence of a redundancy situation.

This article considers what is meant by a “key position” and not “reasonably practicable”.

Key Position

The Act provides that, in determining whether a position is “key” or not, regard may be had to, amongst other things:

the size of the employer’s enterprise; and
the training period or skills required in the job.

Cases which have considered this section provide further clarification:

1. The words unless the employer “proves” that the employee’s position cannot be kept open places a heavy onus on the employer (to establish this fact).

2. The rights of the employee are intended by the Act to outweigh the rights of the employer unless the employer can meet the required onus.

3. A key position is one which is of such a crucial and pivotal nature to the efficient operation of the employer’s business that it is required to be filled on a permanent basis.

It has been suggested that, where a person with elementary skills is employed in a large organization, it will be more difficult to prove that they occupy a “key position”.

However, the position may be different where the organisation is a small one or where the employee possesses specialist skills or training. However, even in either of those cases, the employer must still demonstrate that the position can only be filled on a permanent basis due to the nature of the position itself.

In one case, a mid tier bank employee in a small New Zealand town was held to occupy a “key position” as she was a skilled employee whose role required a lengthy period of training, such skills and training being required for her position.

However, in a number of other cases, employees have not been found to occupy “key positions”, including a librarian, legal adviser and personal assistant to a Chief Executive.

4. A position can qualify as “key” but it may still be “reasonably practicable” to temporary replace that employee.

For example, where an employee within an organization could be temporarily transferred to cover the period of leave, the employer could not establish that a temporary replacement was “not reasonably practical”. This was even though the employee taking leave occupied a “key position”.

Not reasonably practical to replace

1. When considering whether it is “reasonably practicable” to replace the employee temporarily, the question is not a subjective one (i.e. what the employer believes is practicable).

Instead, the test is an objective one – what a reasonable person, standing in the shoes of the employer, would conclude.

2. The test is not whether it would be impracticable or inconvenient to temporarily replace the employee with another employee for the period of leave.

Instead, the focus is on the level of skill required for the position and the size of the employer [that makes it necessary that the position only be filled on a permanent basis]. Any difficulties with replacing the employee, including operational inefficiencies, costs, or finding a temporary replacement, are not relevant unless they are due to the nature of the position itself.

In one case, for example, the fact that the employer was losing several of its staff at the same time, thereby putting remaining staff under pressure while new staff underwent training, was not held to be sufficient to demonstrate that the employee held a “key position”.

Likewise, difficulties in finding a person willing and able to replace an employee on a temporary basis did not suffice as it would have still been reasonably practical to fill the position if a temporary replacement had been available.

Further, in another, the fact that a temporary employee had previously provided leave cover precluded the employer successfully arguing subsequently that it was not practical to fill the position temporarily.

In summary therefore, the wording of the Act, together with subsequent case law, makes it clear that in many cases it is likely to be difficult for an employer to establish that they cannot keep an employee’s position open for a period of parental leave.

This article is not a substitute for legal advice and you should consult your lawyer about your specific situation. Please feel free to contact us at Parry Field Lawyers:

Hannah Carey, Senior Counsel – hannahcarey@parryfield.com

Business can be complicated but it doesn’t have to be. We have helped thousands of clients and know about the key legal areas that will affect you and have just released our fully revised and updated “Doing Business in New Zealand” free handbook. You can download it here.

New Zealand consistently ranks as one of the most business-friendly nations in the world. Given this appealing status and the interest we receive both from local and international investors, as well as form businesses and entrepreneurs, we produced the “Doing Business in New Zealand” handbook a few years ago and now have fully updated it. It is intended to introduce and provide information for those who may be unfamiliar with how business is done here. The handbook provides introduction on business structures, investment rules, employment, disputes, property, intellectual property, immigration, privacy and social enterprise, just to name a few examples.

If you have further enquires please contact Steven Moe at stevenmoe@parryfield.com or on 021 761 292 or Kris Morrison at krismorrison@parryfield.com.

Be sure to check out our other free guides too, such as Startups: Legal Toolkit and Social Enterprises in New Zealand: A Legal Handbook. We also provide free templates for resolutions, Non Disclosure Agreements and other resources on our site as well as many articles on key topics you should know about.

The short answer is, it depends. Key factors include what the employment agreement says about varying the agreement, how significant the proposed change is, why there is a need for the change, whether the change is to the employee’s benefit or not and whether the employer and employee agree.

This article considers the situation where the employment agreement states, as is common, “This agreement may be varied by written agreement between the employer and employee”, the change proposed is more than inconsequential and is not to the employee’s benefit.

Good Faith

The starting position is that the employer and the employee are required, when bargaining for a variation to an employment agreement, to “deal with each other in good faith”. At a minimum that means being “responsive and communicative” towards each other and “active and constructive in continuing a productive relationship.”

In short, in the situation outlined above, employers should tell employees well in advance of the proposed change, the reasons for it, and the possible consequences if the change does not go ahead. A possible consequence may, depending on the circumstances, be that the employee’s employment is in jeopardy. However, that should only be raised if that is a genuine possibility, rather than as a threat.

Employees should be given an opportunity to give feedback on the proposal, including any concerns or alternative suggestions. Employers should maintain an open mind to suggestions made and be willing to vary their proposal if feasible.

Employees should also be told, prior to giving feedback, that they are entitled to get independent advice on the proposal and given sufficient time to get that advice, if they so choose.

If an employee’s employment may be in jeopardy if the change does not proceed, then employees should also be given an opportunity to have a support person or representative with them when they give their feedback.

Employees should not simply reject proposed changes out of hand and refuse to discuss them with the employer. They should engage with their employer and be prepared to discuss concerns and put forward alternatives, with a view to trying to reach resolution if possible.

What should happen if agreement is reached?

If agreement is reached, the terms of the existing agreement should be followed in recording that variation. For example, it should be recorded in writing, signed by both parties, and attached to the agreement.

If the change is solely to the advantage of the employer, an employer should also consider offering the employee some sort of “consideration” (i.e. benefit) in exchange, in order to ensure that the change is binding. This could be a one off payment or a pay increase or some other benefit.

While it is not clear legally that consideration is always required where the parties agree to a change, it is prudent to do so to limit the risk of a future dispute.

What if agreement can’t be reached?

This can be a difficult one. On one hand, the law recognises, as a general proposition, an employer’s prerogative to manage or organise its business. On the other hand, that is not an unconstrained right and the terms of the employee’s employment agreement cannot be ignored.

Consequently, where the proposed change effects an express term of the employee’s employment agreement (e.g. their hours of work) and the agreement states that any variation will be by mutual consent, it will be more difficult for an employer to unilaterally effect a change justifiably, particularly a substantial one.

Nonetheless, in some circumstances, a unilateral change may be permitted, where, objectively, that change is “fair and reasonable” and reasonably implemented. Whether any such change meets that test has been said by the Courts to involve “questions of fact and degree”, i.e. how significant is the change and why and how is it being introduced. Consequently, the individual facts of each case will be critical in assessing whether a change is likely to be upheld or not.

Either way, as with changes by agreement, where the change is solely for the benefit of the employer, the employer should offer some benefit in exchange for the proposed change. This also increases the chances of agreement being reached.

Drafting new employment agreements – a take home message for employers

If you are an employer, we recommend that new employment agreements include scope for changes to be made by the employer where business needs justify it. While employers will still need to follow a fair process, in the event of disagreement, more flexible agreement terms potentially provide greater flexibility in implementing change.

This article is not a substitute for legal advice and you should consult your lawyer about your specific situation. Please feel free to contact Hannah Carey – hannahcarey@parryfield.com at Parry Field Lawyers (033488480).

Are you hosting an end of year work Christmas party for your employees where alcohol will be served? It is important that you are aware that you may be liable under Health and Safety legislation, even if the work party is held off-site.

What does the Health and Safety at Work Act say?

Under the Health and Safety at Work Act, employers are required to provide their employees with a safe workplace, protecting them against harm. The Act states the employers must, “so far as is reasonably practicable” ensure that the health and safety of employees is not put at risk. When defining what is meant by “reasonably practicable”, the Act states that employers should weigh up various factors including:

The chance of the dangerous event or risk occuring;
The level of harm that could result;
What the person knows or should know about the hazard of the risk and the ways of eliminating or minimising the risk;
Ways to reduce the risk; and
The cost associated with minimising the risk (and whether doing so is disproportionate to the risk itself).

“Hazard” as referred to in the Act includes where a person’s behaviour has the potential to cause death, injury or illness to a person, and includes whether their behaviour results from alcohol. Therefore, in the case of a work Christmas party where alcohol is being served, the potential for alcohol to affect someone’s behaviour, putting others at risk, is increased.

Employers must reasonably be aware of the hazard of risk occurring and must take reasonable steps to eliminate or minimise the risk in a reasonably practicable manner.

In the context of hosting a work Christmas event where alcohol is being served, reasonable steps to eliminate and minimise risk might include providing plenty of food, providing non-alcoholic drinks and setting limits on number of drinks.

Liability is not excluded just because you are off-site

It is important for employers to be aware that liability can arise at work events held off-site. As defined in section 20 of the Act, “workplace” means:

A place where work is being carried out, or is customarily carried out, for a business or undertaking; and
Includes any place where a worker goes, or is likely to be, while at work.

A venue that is used for work events will be considered part of the workplace. This means that even if the work party is held at a venue off-site, you cannot strike out the possibility of liability under the Health and Safety at Work Act and you must do everything that is reasonably practicable to provide a safe environment for your employees.

Conclusion: Be aware of the risk and put plans in place to eliminate that risk

In conclusion, it is important that you are aware of the risks and that you do everything that is reasonably practicable to provide a safe environment for your employees.

Every situation is unique so please discuss your situation with a professional advisor who can provide tailored solutions to you.

If you have any questions arising from the issues raised in this article or relating to any other employment law matters, you are welcome to get in touch with us by calling 03-348-8480.

When setting up a company, there are lots of new roles to get your head around. Whether you are a shareholder yourself, or a director in a company, it is important to understand what is expected from the role.

Generally, the constitution of a company determines the rules for how the company is to run. The Companies Act 1993 (“the Act”) often sets out that a company can only do certain things if its constitution allows it. In New Zealand however, a company is not required to have a constitution. Although it is very useful to have, it is not a legal requirement. In the absence of one, the Act sets out the rights, duties and obligations of shareholders, amongst other matters.

Shareholders’ Powers

Although shareholders are not responsible for, and don’t participate in, the day-to-day management of the company, the Act holds that there are certain powers that only shareholders of a company can exercise. These include:

Adopting, altering or revoking a constitution (section 32);
Altering shareholder rights (section 119);
Approving a major financial transaction (section 129);
Appointing and removing directors (sections 153 and 156);
Approving an amalgamation (section 221); and
Putting the company into liquidation (section 241).

While the appointing and removing of directors is usually done by an ordinary shareholders’ resolution (simple majority vote), the other powers require a shareholders’ resolution to be passed by a majority of 75% (or higher if required by the company’s constitution) of those shareholders entitled to vote, and voting on the decision.

Under section 109 of the Act, shareholders may also question and pass a resolution relating to the management of the company. However unless the constitution says otherwise, the resolution is not binding on the board.

Limitations

Shareholders can bring an action against a director for a breach of duty owed to them, but not all directors’ duties are owed to shareholders. Section 169(2) makes it clear that a shareholder cannot bring an action against a director for any loss in the value of their shares by reason only of the loss being suffered by the company.

Reporting Requirements

Under section 178, a shareholder may, at any time, make a written request to a company for information held by the company. The company then has 10 working days from receiving the request to:

provide the information; or
agree to provide the information within a specific period; or
agree to provide the information within a specified period if the shareholder pays a reasonable charge to the company to meet the cost of providing the information; or
refuse to provide the information specifying the reasons for refusal.

The company may refuse if:

disclosure would or would be likely to prejudice the commercial position of the company; or
disclosure would or would be likely to prejudice the commercial position of any other person, whether or not that person supplied the information to the company; or
the request for the information is frivolous or vexatious.

Shareholders’ Exit Strategy

Unlike a director, a shareholder cannot just be removed from a company by the other shareholders If problems between shareholders arise, the Companies Act allows a shareholder to apply to the Court to seek orders against the company or other shareholders – for example for the liquidation of the Company. However, this is where it can often be helpful to have a Shareholders’ Agreement which adds to the ordinary rights and responsibilities of the shareholders under the Companies Act. The agreement can set out who can buy their shares, how the shares will be valued, and any restrictions a shareholder may face once leaving, like a restraint of trade. Again, this Agreement isn’t legally required, but it brings clearer rules that are agreed upon by the shareholders.

Conclusion

Without a constitution, there are laws in place to govern what a shareholder can and can’t do. However if you have a company with more than one shareholder, you may want to look into getting a constitution and/or shareholders agreement. They can provide greater guidance on matters already in the Act, but can also allow shareholders greater involvement in how the business itself is run.

This article is not a substitute for legal advice and you should talk to a lawyer about your specific situation. Please contact Kris Morrison krismorrison@parryfield.com or Steven Moe stevenmoe@parryfield.com at Parry Field Lawyers (348-8480)

And do they comply?

A recent report from Statistics New Zealand suggests that nearly 1 in 10 employees do not have a written employment agreement. Of those who do have written employment agreements, it’s probably fair to say that a proportion of those are not up-to-date. Recent changes to employment law also mean some previously compliant agreements may need revising.

Whether you are an employer or an employee, you should check your employment agreement and make sure it complies with the minimum requirements. If it doesn’t, employees may be missing out on entitlements, and employers could be exposing themselves to increased penalties and claims from employees. Directors and senior business managers can now also be held personally accountable.

Minimum requirements

The Employment Relations Act 2000 (ERA) requires that every employee must have an employment agreement and that agreement must be in writing whether it is for a permanent, fixed term or casual position. The agreement must include the following:

Names of the employee and employer
A description of the work to be performed by the employee
An indication of where the employee will perform the work
Any agreed hours of work or, if no hours are agreed, an indication of the arrangements relating to the times the employee is to work
The wages or salary payable to the employee, and
A plain language explanation of the services available for the resolution of employment relationship problems, including a reference to the period of 90 days within which a personal grievance must be raised.

Employers must retain a copy of the employment agreement.

Within the ERA, there are further specific requirements in relation to certain types of clauses. For example, if the agreement includes a trial period clause, there are specific requirements which must be met if it is to be relied on to end employment within 90 days.

Recent changes

The Employment Standards Bill was enacted earlier this year, with effect from 1 April 2016. It introduced a suite of changes to employment law including some which mean existing employment agreements will need updating. It also toughened the penalties for employers who do not comply with their obligations.

Some of these changes are summarised below. Please see us if you require a more detailed explanation of the changes and what they may mean for you.

Parental leave

Parental leave eligibility was extended to ‘primary carers’ who can include grandparents, aunts and uncles. Those employees on casual and fixed term agreements are also eligible.

Leave entitlements have been extended, and there is now also the option of agreeing to ‘keeping in touch’ arrangements. These are where employees can return to work on a limited basis for up to 40 hours (total) during their leave without losing their leave entitlements. This allows employees to keep up-to-date with any training or changes in the workplace, and to maintain their social and professional bonds.

Zero-hour contracts

‘Zero-hour contracts’ is a colloquial term for employment contracts which require an employee to be available for work, but don’t offer any guaranteed hours or compensate the employee for being on-call. Zero-hour contracts are now prohibited.

Where an employer and employee agree the hours that are to be worked, this must be recorded in the employment agreement. Where particular hours are not agreed, the agreement needs to give an indication of the hours.

Employers who want to be able to require employees to be available for extra work must include an ‘availability’ provision in the employment agreement. This must set out minimum guaranteed hours of work, and any period which the employee is required to be available above the guaranteed hours. Employment agreements cannot contain an availability provision unless the employer has genuine reasons for requiring it and the employee is reasonably compensated for making themselves available.

If the employment agreement doesn’t comply with these requirements, the employee cannot be required to work more than the agreed hours and cannot be treated adversely if they refuse to do this.

Deductions from wages

Currently, employers need the express consent of their employee to deduct any amounts from wages (other than PAYE, etc). Employment agreements commonly contain an agreement to this effect so that the employer does not need to obtain consent every time a deduction needs to be made.

Now, even if the employment agreement contains such a clause, an employer must still consult with their employee before making a deduction. There is also a prohibition on making unreasonable deductions from wages, even if the employee consents to them. An example of an unreasonable deduction might be in relation to theft of the employer’s property by a customer where the employee had no control over it.

Secondary employment

Employment agreements often contain limitations on an employee’s ability to undertake work for other people. These clauses are now subject to a number of limitations.

It’s only permissible to include such a clause if the employer has genuine reasons based on reasonable grounds, and those reasons are stated in the employment agreement. Genuine reasons can include:

Protecting commercially sensitive information or intellectual property rights, or the employer’s reputation, or
Preventing a conflict of interest that cannot be managed without such a restriction.

A secondary employment clause can only prohibit or restrict other work to the extent necessary having regard to the reasons set out in the agreement.

For agreements that were entered into before 1 April 2016, employers have until 1 April 2017 to remove or amend clauses in existing agreements which don’t comply.

It’s important to get it right

The Employment Standards Bill also made other changes which emphasise the importance of employment agreements:

Record keeping requirements have been clarified
Penalties have increased
Employers can be publically named if they fail to meet minimum employment standards, and
People other than the employer (for example, directors and senior managers) can be held liable.

Failing to meet minimum standards can result in penalties and infringement notices being issued. It can also have a significant effect, for example, on an employer’s ability to dismiss an employee.

Check your agreements

This is a good time for all employers and employees to check their employment agreements to ensure they comply with the minimum standards set out above. Employers may also have policies which may need updating.

If your employment agreement doesn’t comply with the new legislation, talk to your employee or employer about amending it to bring it up-to-date. We have experts who can assist.

This article is not a substitute for legal advice and you should talk to a lawyer about your specific situation. Should you need any assistance with this, or with any other Employment matters, please contact Hannah Carey – hannahcarey@parryfield.com or any of the team at Parry Field.

We have seen a lot of employers falling into some common pitfalls when interacting with their employees. These are our Top 10 Tips for employers for avoiding the most common employment relations issues.

1. Do a thorough pre-employment check Make sure to screen all potential employees before hiring them. Things such as criminal history, medical-and drug-testing, and good referee checks can help avoid employment problems down the road.

2. Finalise and sign employment agreements before an employee starts work The employment agreement is the most important document of the employment relationship, so make sure it is finalised and signed before the employee starts work. A 90 Day Trial Period will only be enforceable if the agreement is signed before the employee starts work.

3. Choose the correct employment agreement Whether you use a permanent, fixed-term, or casual agreement will depend on the circumstances, and each carries its own benefits and risks. Do not be tempted to use a fixed-term agreement to establish whether an employee is suitable for permanent employment.

4. Have policy documents on display and easily accessible Employee practices are often governed by company policies as well as by the terms of their employment agreement or job description. Whether they relate to health and safety, company vehicles, IT, or telecommunications, employees can only be bound by rules they are informed of, so have all policy documents accessible and encourage employees to read them.

5. Keep proper records of every employee This includes records of the employee’s annual and sick leave entitlements, wage/salary records, job descriptions, and a copy of their employment agreement. Make sure you have a file for each employee, and that all their records are filed in it.

6. Always consult with employees before adjusting their hours, roles, or terms Employers cannot unilaterally change the terms on which an employee works. Consulting with employees on these matters is vital, and you may find that they have ideas you had not considered.

7. Keep up-to-date with developments The law is changing all the time; make sure to keep up-to-date with the latest changes to employment law, even where it seems irrelevant to your specific business. It may be that the law has wider application than you expected, or that it becomes relevant further down the track.

8. Act promptly and follow correct disciplinary and redundancy procedures Where you suspect an employee of misconduct or poor performance, act promptly and always follow clear and fair procedures. Never ambush employees with allegations or performance review meetings. Give employees full and timely notice of any disciplinary meetings, and allow them time to prepare and respond.

9. Do not be afraid to go to mediation Most employment problems can be resolved by either informal negotiation or in mediation. Mediation is a voluntary and highly flexible method of resolving disputes, and often leads to mutually satisfactory outcomes.

10. When in doubt, come to us Whenever you have concerns about an employee or the terms of your employment agreements, talk to your lawyer before taking any steps. We can help to determine the best approach to take, resolve disputes as quickly as possible, and assist in improving your employment agreements.

Parry Field has been assisting employers in New Zealand since 1948. Based in Christchurch we have the experience and resources to help you.

You may have hired a worker as a contractor or have begun working as a contractor, but the Courts may see the relationship differently to you. Instead, the Court may decide that the relationship was rather one of employer-employee. This can have significant implications, as outlined below.

In deciding this issue, the Court has to consider the “real” nature of the relationship. To this end, the Court:

• Must consider all relevant matters, including any matters that indicate the intention of the parties; and

• Are not to treat as a determining matter any statement made by the parties that describes their relationship (e.g. if the contract describes one party as a contractor).

So what is the distinction between an employee and a contractor?

The distinction usually lies in whether the person is performing the services as a person in business on his/her “own account. If they are in business on their “own account”, they will usually be an independent contractor.

The Courts have developed a variety of tests over the years to assist in assessing the relationship. Examples of these include:

• What degree of control does the employer have over the work done and the way in which it is performed? The more control an employer has, the more likely it is to be an employment relationship.

For example, if the worker is required to work set hours, is not able to sub-contract the work out to anyone else, is unable to work for other competing businesses, is required to follow workplace rules and is closely monitored, this is may suggest that the “contractor” is actually an employee.

• Is the person a fundamental part of the business – are they “part and parcel of the organisation” or do they merely have an ancillary role?

The more integral to the business, the more likely you are to be an employee.

• Was the person performing the services on his/her own account or as part of the business?

For example, if the worker is providing his/her own tools/equipment, is invoicing the organisation, is able to hire his/her own labour and is responsible for his/her own tax and ACC payments, this may suggest that the worker is a contractor.

Why should this distinction be of a concern for me?

If you engage a worker as a contractor but then, later, that worker is held to be an employee, the following flow-on effects could occur:

• You or your organisation/company could become liable for backdated holiday pay and sick pay from the commencement of the services;

• The tax position will be reassessed. You may become liable for tax.

• The worker will be able to follow all of the processes contained in the Employment Relations Act 2000 including bringing a personal grievance against you/your organisation.

Vice versa, if you are performing work as a “contractor” but fail to see how your situation is any different to a regular employee, you may be missing out on employment entitlements which you are legally entitled to such as holiday pay/leave, sick pay, bereavement leave, kiwi-saver contributions and minimum wage entitlements. You may also believe that you are prevented from bringing a personal grievance against your “employer”.

If you are intending to take on a new worker and wish him/her to be a contractor, at a minimum you should ensure the following:

• That there is a “contact for services” contract in place (we can draft an appropriate document for you);

• That the person is invoicing you/your company for the services provided and payment is made on receipt of an invoice. The person will need to be responsible for their own tax and ACC payments;

• That you do not exercise too much control over the services and how they are being provided e.g. make sure there is flexibility in terms of when the services are to be performed and allow the person to undertake other work (even if it for a competing business);

• That the person provides his/her own equipment/tools (where appropriate).

If you are currently contracted as a “contractor” and are unsure whether in fact you should be classified as an employee, we recommend that you raise this with the business you work for and/or contact us for further advice.

Should you need any assistance with this, or with any other Employment matter, please contact Hannah Carey at Parry Field Lawyers (348-8480).

New Zealand’s Employment Relations Act 2000 is designed to recognise and address the perceived inherent imbalance of power in the employment relationship by promoting collective organisation of employees and collective bargaining, through unions.

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