Employment Law

Employment Law Changes from 1 April 2016 – What you need to know

The new financial year ushers in significant employment law changes. All employment agreements entered into from 1 April 2016 must comply with these changes, so it is important that employers are fully across the new requirements from day one.

The Employment Standards Legislation Bill has passed its third reading in Parliament and will come into force from 1 April 2016. The Bill’s changes aim to increase the availability and flexibility of paid parental leave, strengthen enforcement of employment standards (with hefty penalties for noncompliance), and prohibit “zero-hour” employment agreements and other unfair practices. We discuss the key changes below.

Changes to Paid Parental Leave

Paid parental leave is being extended from 16 weeks to 18 weeks from 1 April 2016, with extended eligibility for those who have primary care responsibilities (beyond natural or adoptive parents), those who have worked for less than 12 months for the same employer and those employees who work multiple jobs or are employed on a casual, seasonal, temporary or fixed-term basis.

The changes will also introduce more flexibility to the paid parental leave regime, allowing workers on parental leave to “keep in touch” and work up to 40 hours in total during the 18 weeks of paid leave by agreement with their employer. Workers will also be able to resign during the period of parental leave and still receive payments.

Strengthened Enforcement of Employment Standards

Employers who breach employment standards face tougher sanctions under the new laws, and record-keeping requirements have been clarified. Employers will need to keep detailed records of hours worked by all employees. For employees who work regular hours each day for regular pay, this should be set out in the employment agreement. However, if employees have no “usual” hours, an accurate record of the hours worked each day and the pay received for those hours will be required.

If employers do not keep adequate records, they face infringement fees of up to $20,000, or $1,000 per breach. Labour inspectors also have increased powers to request any record or document from employers (such as bank statements or other financial records), and will have access to a wider range of information from Immigration New Zealand, the Companies Office and Inland Revenue.

Prohibition of “zero-hour” Contracts and Other Unfair Practices

“Zero-hour” contracts

One of the most publicised changes to the law is the prohibition of “zero-hour contracts”. An employment agreement will be “zero-hours” if it requires an employee to be available for work, and accept any shifts they are given, with no requirement that the employer in fact provide any shifts.

These will be prohibited except where the employer has genuine reasons (such as genuine business demands) for such a provision, and employees must now be “reasonably compensated” for making themselves available. For salaried employees, it can be agreed that this compensation is included in salary payments. If there is no genuine reason for a “zero hours” provision in an employment agreement, the employee can refuse to work and not face any consequences.

Agreed hours of work

If an employee’s hours of work are agreed, the parties’ employment agreement must state what has been agreed. This includes agreement on the number of hours, the employee’s start and finish times, the days of the week the employee will work and any flexibility in what has been agreed.

The employer and the employee do not have to agree on hours of work, but anything that is agreed needs to be recorded in the agreement.

Cancellation of shifts

An employer must provide reasonable notice or reasonable compensation if they cancel an employee’s shift. The employment agreement will need to detail what the agreed notice period or compensation will be, and both must be “reasonable”. What is reasonable for a particular employment relationship will vary depending on the circumstances.

If the reasonable notice or compensation requirements are not met, the employee is entitled to be paid as if they had in fact worked the cancelled shift.

Restrictions on secondary employment

Unless there is a genuine reason to stop an employee from entering into secondary employment, such as a risk of losing commercially sensitive information or intellectual property, or a real and unmanageable conflict of interest, employers must not restrict their employees from taking on second jobs.

Deductions from employees’ wages

Employers must consult with employees on each specific deduction even where the employee has already given general consent in their employment agreement (this doesn’t include lawful deductions like Kiwisaver or student loan repayments). Any deduction from wages must be reasonable, even if an employee consents to the deduction. This change is designed to prevent employers from deducting money from employees for losses such as customer thefts.

Need more information?

While all new employment agreements must comply with the law changes immediately, employers have a one-year ‘grace period’ to ensure that existing agreements comply. If you would like assistance or advice on any of the changes discussed above, or any other aspect of employment law, please contact us.