On 1 July Immigration New Zealand is launching a new information service model for new migrants to help them settle and work in New Zealand.    The model is for new migrants, their families and their employers and will offer more services in more locations throughout New Zealand.

The primary resource for generic and local information about living and working in New Zealand will now be through (New Zealand Now www.newzealandnow.govt.nz).

From 1st July, Immigration New Zealand is also introducing a settlement information service to its Contact Centre.  Information about living and working in New Zealand will be available via the free-phone number 0508 558 855, (press 2). Further, from 1st July, email queries can be emailed to (newmigrantinfo@mbie.govt.nz).

Shortly, Immigration New Zealand will announce a new face-to-face service provider for those new migrants who prefer to speak to someone about their settlement information needs.  The new provider will also deliver workshops and seminars about living and working in New Zealand for new migrants in local areas throughout the country.

By Janet Copeland

Under the KiwiSaver Act 2006 (KSA) an employer is obliged to pay compulsory employer contributions (CEC) for each employee who is enrolled within an eligible KiwiSaver scheme or complying superannuation fund, unless, the employee has turned 65 years old or has been in KiwiSaver for at least 5 years (whichever is later).  The contribution rate determines how much CEC an employer must pay, this is set currently at 2% of an employee’s gross salary or wages.

There are two ways employers may pay their CEC’s under the Act; through either the default approach or what is known as the total remuneration approach. This article focuses on the requirements of the total remuneration approach and recent case law on the matter.

DEFAULT APPROACH

The default approach to paying compulsory employer contributions is that the CEC must be paid in addition to the employee’s gross salary or wages. Any arrangement otherwise is of no effect unless it falls within the exception outlined in s101B (4) of the KSA.

TOTAL REMUNERATION APPROACH

This exception is widely known as the total remuneration approach and allows parties to freely agree to contractual terms and conditions that disregard the default position.  The total remuneration approach provides for all payments an employee receives under their employment agreement including salary, wages, allowances or CECs. This approach will fail to apply where the contractual terms and conditions do not account for the amount of compulsory contributions the employer is required to pay. What is required to “account for” the CEC has been a grey area, but has been traversed by the full Employment Court in the recent case of Faitala v Terranova Homes & Care Ltd [2012] discussed in depth below. The Court held that a calculation of the actual CEC based on the employees gross wages or salary is not required, rather a simple statement of how the figure was arrived at will suffice, such as referring to the current contribution rate.

WHAT IS INCLUDED IN TOTAL REMUNERATION?

A total remuneration approach enables the parties to agree, under the employment agreement, to include into a remuneration package the employer’s contribution as an identifiable component of the employee’s pay.

For example Jane Bloggs’ Total Remuneration Package:
Compulsory Employer Contribution          $785.00  (2 % of base salary)
Take home salary (base salary)           $39,215.00  (less taxes and deductions)
Total Remuneration Package               $40,000.00

The advantages of total rem are that when the CEC increases, the amount adjusts within the capped total remuneration package. For example, if the CEC increases to 3%, the base salary or wage would decrease (to $38,835.00) to account for the change, but the overall total remuneration remains the same ($40,000.00).

The legislative history and the express requirement to negotiate such arrangements in good faith make it likely that an employee, who is currently paid CECs on top of their remuneration, should not have their wages or salary reduced to incorporate CECs within their current remuneration.   However, future variations and/or any new employment agreements can legally include such an arrangement, provided this arrangement is stipulated.  An employer can negotiate a total remuneration clause into an existing employee’s contract by accompanying the offer with the employee receiving at least a 2% pay rise to cover the amount of CEC, provided the employee agrees to formally vary their employment agreement to include the total remuneration.

RECENT CASE LAW

In Faitala v Terranova Homes & Care Ltd [2012] NZEmpC 199 Chief Judge Colgan and Judge Inglis in the full Employment Court had to determine whether Terranova Homes & Care Ltd was entitled to deduct the CEC from the employee’s gross wages in circumstances where those wages are at the minimum level specified in the Minimum Wage Act 1983 (MWA).

Under section 6 of the MWA, an employee is to receive payment for her work from her employer at not less than the minimum rate (currently $13.50 per hour) this is to apply notwithstanding anything to the contrary in “any other enactment, award, collective agreement, determination, or contract of service”. Two issues were said to arise from this, firstly, whether payment of an employee contribution through the IRD to an employees KiwiSaver is payment “received by an employee from their employer” and secondly, whether this constitutes “payment for the employee’s work”.

The Court stated the underlying purpose of the MWA is to ensure that workers receive a living wage to meet the basic day-to-day living expenses of the worker and his/her family. The court said there was nothing to suggest that it builds in a component for saving for retirement, rather it is designed to meet the basic necessities of day-to-day living. The CEC is not paid to the employee rather it is paid to a KiwiSaver provider or complying superannuation fund via the IRD, and then held for the benefit of that person until they turn 65 years (or qualify for withdrawal). Thus the employee may have upwards of 50 years before he/she receives the benefit of the contribution. Additionally, if the money is paid out it is not paid out as salary; rather, it is paid out as pension. Section 4 of the KSA expressly excludes complying superannuation funds form the meaning of salary and wages.

The contribution is payable by virtue of the employee’s election to join KiwiSaver, the trigger is the operation of the statute rather than the labour performed. The employer contribution is not money exchanged for labour and no consideration is provided in exchange for it. Therefore the Court concluded that a deferred payment to an employee of a CEC does not constitute payment by an employer for work performed by an employee for the purposes of the MWA.

Relationship between the KSA and MWA
Section 101B of the KSA deals with the way in which an employer may make contributions to a KiwiSaver scheme or complying superannuation fund. The default position is that the CECs are paid in addition to an employee’s gross salary or wages. However, section 101B(4) provides the exception that parties to an employment relationship may agree contractual terms and conditions that disregard the purpose unless the contractual terms and conditions don’t account for the amount of compulsory contributions the employer is required to pay.

The Court held that nothing in s101B states the parties are free to agree contractual terms and conditions that override the MWA and section 6 prohibits such an approach. The Court said the MWA is designed to provide a mandatory floor by which an employer can not go below and if Parliament intended to provide an exception to the MWA it would have done so expressly. The Court stated when ss 6 and 101B are read together, and in light of their respective purposes, it is apparent that the latter is to be read subject to the former. This means that for an employee on minimum wage an employer is obliged to pay the 2% contribution in addition to the minimum wage.

What is needed to “account for” the amount of compulsory contributions?

The Court stated the requirement to account for the amount of compulsory contributions does not require a statement of a numerical figure, rather a simple statement as to how that figure is arrived at.  In the present case the amount was determined by reference to the prevailing statutory rate contained within the KSA which the Court said was sufficient to account for the amount of compulsory contributions. The Court said adding a numerical amount would require amending the provision each time the minimum wage was altered, the Court said this degree of specificity was not required on a plain reading of s101B(4)(b).

IMPLICATIONS

This case demonstrates that an employer cannot apply a total remuneration approach that negates the requirements of another act that confers minimum payment rights to employees, such as the Minimum Wage Act. This case also helpfully demonstrates what is required to “account for” the amount of CEC, where a simple statement of how the figure was arrived at will suffice, such as referring to the current contribution rate.

PROPOSED AMENDTMENTS TO THE KSA IN 2013

There are proposed changes to employee and employer contribution rates from 1 April 2013 with the minimum employee contribution rate rising from 2% to 3% for all members and the minimum CECs will rise from 2% to 3%.

RECOMMEDATIONS

We recommend including a clause in employment agreements that seeks to incorporate CECs in the total remuneration of a new employee or during negotiations with a current employee as a variation to their terms and conditions.  However, note that during any negotiations the wages or salary of a current employee should not be reduced, particularly if they are currently paid CECs on top of their remuneration. Such an employee cannot have their wages or salary reduced to incorporate CECs within their current levels of remuneration in light of the legislative history and the express requirement to negotiate such arrangements in good faith.

Disclaimer

This article is produced to provide a brief summary of issues that have developed in the area of employment law. While we take time to ensure the information is correct, details may be omitted which may be directly relevant to a particular reader. The information should not therefore be taken to be sufficient for making decisions. If you have any questions in relation to anything discussed in this article or just a general query, contact the writer or team at Copeland Ashcroft Law who will be happy to assist you.

First published in Pay and You (PAY) – Issue 2, February 2013
http://www.nzppa.co.nz/magazine/02/

Health and Safety is critical to running a successful and safe farming business.  Whether you own a Farm, Sharemilk, Contract Milk or work as an employee, we thought it timely to take the time this Christmas to talk about health and safety to ensure everyone enjoys going home safely to celebrate this holiday season.

Employers – the Legal Bits

Currently the Health and Safety in Employment Act 1992 (Act) hands employers the primary responsibility for staff safety and ensuring anyone else within the vicinity of the workplace is safe.  At the very least employers must take “all practicable steps” to:

Have an effective hazard management system in place that identifies existing, new and significant hazards on an ongoing basis (Think:  Living, Breathing Hazard Register and Controls).
Eliminating significant hazards.  But if you can’t or it’s not practical to, you must isolate or minimise significant hazards such as ensuring staff use suitable clothing and equipment (Think:  Quad Bike Helmets!).
Train and supervise staff to ensure they have the right knowledge and experience they need to work safely on the job, and with any plant or substances they’re using (Think:  New staff Inductions and training records)
Involve staff in health and safety matters by ensuring they get reasonable opportunities to help you improve it and by giving staff access to easily understandable information about emergencies, hazards and  safety clothing and equipment (Think:  Regular meetings and discussions on health and safety)
Record and notify WorkSafe where appropriate of accidents and serious harm (Think:  Prioritising Paperwork).
As well as all this, employers must ensure their staff don’t do anything that might harm anyone else in the workplace. Employees need to ensure their own safety and that they don’t cause harm to others.

If an accident happens in your workplace and an employee or someone else is harmed, WorkSafe or the Court will consider whether you have taken all the steps that were reasonably practicable to take in all the circumstances to protect staff.  What the industry is doing and the “current state of knowledge” about harm, how to prevent it and the availability and cost of the means you could use, are all relevant.  This is why having a health and safety policy and plan tailored specifically to your workplace is so important.  The District Court commented back in 1999 that written policies are a no-brainer:

It needs to also be emphatically said that by now all employers should be aware of the need to have a written policy in place and it is not sufficient to simply, when something happens,  try and explain away the situation by saying that safety courses had been attended to and that employees should have been responsible or OSH should have done more.  A general message needs to be sent to all employers again that it is incumbent on an employer to have written policies in place.

The Principal of It

It’s not just employers that can be penalised for getting it wrong – anyone who controls a workplace and Principals engaging contractors must comply with obligations too.  Any person who controls a workplace, including place or plant owners, must take all practicable steps to ensure that no hazard that is or arises there harms anyone nearby and anyone lawfully present like customers and contractors and their staff. You must also warn anyone visiting recreationally about any unusual hazards.

Principals must take all practicable steps to ensure that none of their contractor’s staff are harmed while doing work they’re engaged to do. If you sell or supply machinery, you need to actively enquire as to whether its destined for a workplace and if so, take all practicable steps to ensure it is designed, made and maintained so it’s safe for its intended use (excluding second-hand goods sold on an “as is” basis).

The Legal Bits that Bite

Failing to comply with your obligations as an employer, principal or employee can cost.  For an offence likely to cause serious harm, you risk being jailed for up to 2 years and/or a fine of up to $500,000. For other offences you risk a fine of up to $250,000 or if it’s about your duty as a person controlling a workplace, a fine up to $10,000.  You don’t even have to intend to breach your obligations.

You need to know that people and entities can owe more than one duty, several people or entities can have the same duty and you can’t blame someone else for your mistakes.  For example, the Court of Appeal has made it very clear that although an employer bears a heavy burden to protect staff, Principals cannot avoid their obligations by delegating health and safety to a contractor.  All duty holders must take a proactive and preventive approach to promoting health and safety in the workplace:

The fact that the primary obligation to procure safety rests upon the employer does not exonerate or diminish the responsibility of other persons in the other capacities recognised in ss 15 to 19 from discharging the statutory duty imposed upon them. Section 2(2) could not be more clear; the same person may represent two or more of these capacities; the same duty may at the one time be imposed on two or more persons whether in the same capacity or a different capacity; and no duty imposed on any person is to be diminished or affected by the fact that it also may be imposed on one or more other persons. The Act does not then adopt a prescriptive approach to the duties of those made responsible for safety in the workplace.

It provides a comprehensive set of general principles but leaves the detail of acceptable practices to be worked out and implemented by regulations and codes of practice within the various industries.

A Principal cannot escape liability by attempting to distance itself from what happens onsite, engaging a competent contractor or by pointing out a contractor’s breaches.  More must be done like stipulating in advance what safety standards a contractor must observe and taking action if unsafe practices are observed.

Agricultural workplaces are no different.  Farm owners and sharemilkers often share responsibility and risk prosecution for failing to take an active interest in health and safety.  In a tragedy close to home, sharemilkers in a 50/50 Sharemilking arrangement with a farm owner, found themselves liable for the failure to ensure the proper guarding of a PTO resulting in their Farm Manager’s death.  The Sharemilkers who employed the farm manager were found in breach of their obligations to ensure staff safety. The farm owner, who lent the tractor to the sharemilkers and farm manager, was found in breach of the obligation to ensure the safety of contractors and their staff.

Directors and agents of a company won’t escape either if they are found to have authorised or otherwise participated in any failure by a company.  You may recall a case in 2009 where a cool store exploded after a contractor installing a substandard refrigeration system.  The explosion killed one firefighter and seriously injured several others.  The company in control of the worksite and who gave permission for the firefighters to enter, its managing director, and the contractor who installed the substandard refrigeration system in the first place, were all prosecuted and penalised for their failures to adequately protect employees or others against hazards within the workplace. In another case the District Court held someone liable due to their ability to enter into contracts for the company they worked for even thought they were not a director:

… a company operates through its human officers. There is no ability in fact to make decisions on its own so it is the failure of Mr Mann which in fact renders the company liable at all. Those who are agents or officers of companies need to know that they cannot shelter behind the corporate veil and will be regarded as giving rise to a company’s liability in the circumstances where they fail to comply with the obligations.

Since the High Court’s landmark case that set out the way offenders will be sentenced, the Court’s have repeatedly adopted an approach that takes into account a person’s culpability that includes identifying what practicable steps a person should have taken. It is likely that the more steps someone fails to take the higher the culpability and any fine.

What it means for you and your farm

The obligations imposed on farm owners, contractors and employees are as varied as the business structures, staff relationships, farm terrain and types of machinery and buildings you have.  This demands a tailored and specific approach to how you handle health and safety.  You cannot easily comply with your obligations by using generic health and safety documentation.  Although many similarities exist and we encourage information sharing, an employer, principal or other duty holder personally bears the responsibility for ensuring they comply with their specific obligations.  These obligations cannot be contracted out of or delegated.

For an employer, the duty to effectively manage hazards is specific to your workplace and your farm.  You must systematically identify existing, new and significant hazards where you work and work out the best way to eliminate, isolate and minimise hazards, train and supervise your team on the work, handle hazardous substances, and involve your staff in health and safety matters.  Clearly a practicable step is ensuring you have a comprehensive and robust health and safety policy and plan tailored to your workplace.

For a Principal, you will want to ensure that sharemilkers and contractors have adequate systems in place and require regular audits of health and safety practices.  At the very least, a savvy Principal would require every farmer and employer to put in place a health and safety policy and plan specific to where they work and what they do.  Having a plan specific to a Principal’s unique obligations is key too.  Then if an accident happens, you can show that you have taken this step to comply with obligations.

You can still slip up if you don’t use and update your plan though, even the most sophisticated plan is useless if it’s sitting there collecting dust!

Reforming your thinking

An employer’s obligations will only increase under the Health and Safety Reform Bill (Bill) that aims to provide for a framework to secure the highest level of protection against harm to the health, safety and welfare of workers (widely defined to include contractors and their staff). The Bill would introduce a wider concept of a person conducting a business or undertaking (PCBU).  This would include employers and principals who would both owe a primary duty of care to take all reasonably practicable steps to protect workers against harm.  Similar duties would apply to those managing or controlling a workplace to protect others, as well as those providing plant.  In addition, anyone who makes decisions affecting the whole or a substantial part of a PCBU (Think:  Directors and Farm Managers) would owe a duty to exercise due diligence to ensure that the PCBU complies with its obligations.  This would include the Officer taking reasonable steps to ensure they are up to date with health and safety as it relates to the nature of operations and ensure adequate resourcing and processes for ensuring health and safety are in place and verifiable (Think:  regular audits and a paper trail).

This means that under the Bill, many key decision makers involved in a farming business would likely be a PCBU and/or officer and liable for the much higher penalties that could be imposed for failing to comply with duties.  For a PCPU or Officer this is up to $100,000 for failing to comply with a duty even if it does not result in risk exposure and up to $600,000 for a reckless breach; for a body corporate, up $500,000 or $3 million:

Thank you for taking an interest in the health and safety of your staff – it makes good business sense.  If you or anyone you know is unsure about their obligations, or would like to understand how your business could benefit from having a health and safety policy and plan tailored to your workplace – get in touch with a member of the Progressive Agri HR team.  We will update you on the Bill as it progresses through Parliament.

Paying properly for public holidays this festive season beats paying the penalties if you don’t.
Many employees watch what they are paid closely and payments for public holidays are no exception. Employees are likely to ask questions if they suspect they’ve been short-changed.
We understand that it can be a challenging time of year for employers, as you try to make sense of the Holidays Act 2003 and understand employee entitlements.

Observing and transferring public holidays this Christmas and New Year
This year Christmas Day and New Year’s Day fall on a Wednesday and Boxing Day and the day after New Year’s Day fall on a Thursday.  This means that there are no special rules for any of the holidays this festive season as they will be observed on the days they fall and employees would be paid for those days only if they would otherwise be working days for them.
Since 1 April 2011 employers and employees can agree to transfer the observance of public holidays to another working day if a written agreement identifies which public holiday is being transferred and the new calendar date it is being transferred to. The new date can’t be another public holiday and must be a normal working day for the employee. For example, if an employee normally works Wednesdays, you could agree to transfer Christmas Day to Wednesday 9 January 2014.  In any lawful exchange, entitlements transfer fully to the new day. But an employer can’t do it solely to avoid obligations or if it reduces the total number of paid public holidays an employee otherwise gets. If all that swapping seems a bit much – an employer can promulgate a policy prohibiting exchanges.

Payments
Employers may have to pay staff even if they don’t work.  Using this festive season as an example, an employee who normally works on a Wednesday will be entitled to their normal pay for Christmas Day even if they don’t work.  But if they do work, they get their normal pay, plus half that amount again, for the hours they actually work. They also get an alternative holiday (commonly called a day in lieu) to take later on.
An employee who doesn’t normally work on a Wednesday will only become entitled to be paid if they actually work. Then they get their normal pay, plus half that amount again, for hours they actually work.
Drilling down, normal pay means the employee’s relevant or average daily pay for the public holiday.  Relevant daily pay means the amount of pay an employee would have received had they worked.  It includes regular payments like commission and overtime rates if the employee would have received them had they worked. So if an employee normally works and is paid for 10 hours on a Wednesday – this is what they should be paid for.
If an employee’s daily pay varies within the pay period relating to the public holiday (or if it’s not possible or practicable to calculate the relevant daily pay), then an employer can use a daily average of the employee’s gross earnings for the previous 52 calendar weeks.

Would or Wouldn’t?
Not sure if your staff would‘ve worked?  Try to reach agreement after considering the employment agreement and work patterns. It doesn’t matter whether an employee is casual, fixed term or permanent – always ask whether “but for” the day being a public holiday, the employee would have worked. The answer to this question requires you to look at your specific situation and staff.

Knowledge is Key
Whether you will or won’t work on the public holidays this festive season, make sure you know when and what your employees are entitled to. Some staff won’t be entitled to anything but you need to know why not and answer any questions in a way that you and they understand.  Paying properly for public holidays beats paying penalties if you don’t.

ADULT MINIMUM WAGE
The Government announced earlier this week that the adult minimum wage will increase from $13.75 an hour to $14.25 an hour from 1 April this year. This will take the adult minimum wage rates (before tax) to $114.00 for an 8-hour day and $570.00 for a 40-hour week.

It was expected there would be an increase of 25 cents so the 50 cents (3.6 %) rise has exceeded expectations.

Labour Minister Simon Bridges has said that the increase “represents a careful balance between protecting low paid workers and ensuring jobs are not lost.”

Who does the adult wage apply to?
The adult minimum wage applies to all employees aged 16 years and over who are not starting-out workers or trainees, and all employees who are involved in supervising or training other employees.

STARTING-OUT AND TRAINING MINIMUM WAGE
The starting-out and training minimum wage will increase from $11.00 an hour to $11.40 an hour from 1 April this year (80% of the adult minimum wage).

Who does the starting-out and training wage apply to?
The starting-out wage applies to all starting-out workers. They are:

16 and 17 year old employees who haven’t completed six months of continuous employment with their current employer;
18 and 19 year old employees who have been paid a specified social security benefit for six months or more, and who haven’t completed six months continuous employment with any employer since they started being paid a benefit. Once they have completed six months continuous employment with a single employer, they will no longer be a starting-out worker, and must be paid at least the adult minimum wage rate; and
16 to 19 year old employees who are required by their employment agreement to undertake industry training for at least 40 credits a year in order to become qualified.

The training minimum wage applies to all employees aged 20 years or over who are undertaking recognised industry training involving at least 60 credits a year as part of their employment agreement, in order to become qualified.

WE CAN HELP:
If you have any questions regarding the requirements of the upcoming minimum wage increase please do not hesitate to call us on the numbers listed below. We are more than happy to field any questions you may have and help ensure you are fully compliant with your legal obligations as an employer.

In March, the Government introduced the Health and Safety Reform Bill 192-1 (the Bill). The Bill is based on Australian Model Law and if enacted will replace the Health and Safety in Employment Act 1992 (HSE Act) and will significantly alter the landscape of health and safety related legislation. The Government proposes to pass the Bill before the 2014 General Election with the aim of introducing it in April 2015.

PROPOSED CHANGES

PCBUs
The Bill introduces the concept of a person conducting a business or undertaking (PCBU) which is very broad and has been drafted to capture all modern working relationships. A PCBU will have the primary duty of care for ensuring so far as is reasonably practicable the health and safety of workers engaged in the business or undertaking.

The Bill also sets out a duty for PCBUs who manage or control a workplace to ensure no risks to health and safety of any person in terms of entering and exiting it.

Duty and liability of officers
The proposed new law will create a duty on officers of the PCBU to exercise due diligence to ensure that the PCBU complies with its duties or obligations.

This new duty will apply to company directors, chief executives and managers and will require that they keep up to date with health and safety matters, understand the operational hazards that exist and ensure that there are appropriate resources available.

Offences
Under the proposed new law a tiered penalty regime will be introduced which will increase the level of penalties. This will bring greater clarity to the Courts as to what is an appropriate fine level. The most serious offending carries a fine of $3 million for a body corporate and $600,000 and/or five years imprisonment for a PCBU or officer of a PCBU.

Workers
The Bill sets out a duty for all PCBUs to consult with workers about health and safety. This is not a new duty but because the definition of worker has been widened to include the likes of contractors, subcontractors and their employees it means that consultation with the workers will be wider.

WHAT DOES IT MEAN FOR YOU?
You need to know your rights and obligations and proactively address health and safety to prevent harm in the workplace. If you don’t know the inner workings of the organisation spend time on the ground to improve your understanding.

We recommend ensuring that you have a comprehensive health and safety management system that you review regularly and is put into practice by everyone.  Now is a good time to check you have your systems ready to comply with the proposed changes.  For example, check you have the following measures in place:

• A Master Hazard Register to identify and control all possible hazards and their risk level.
• Consult with workers when drafting and updating the Register as they are often in the best position to identify the hazards and come up with practical controls.
• A register to record all incidents, near misses and accidents that occur in the workplace.
• Proper training and supervision for all new employees, contractors and sub-contractors.
• Reasonable opportunities for employees to participate effectively in the ongoing improvement of health and safety in their workplace. Do you or your manager have a good understanding of heath and safety and work with staff regularly on how to improve it? If not, you should.

Managing an organisation’s health and safety risk is just as important as managing financial and reputational risk and should receive the same focus. Seek advice if you are unsure – we would more than happy to help.

Disclaimer: We remind you that while this article provides commentary on employment law topics, it should not be used as a substitute for legal or professional advice for specific situations. We recommend that you obtain legal advice specific to your situation before proceeding and would be happy to help in this regard.

Background

The Ministry of Business, Innovation and Employment (MBIE) visited 41 employees in the Queenstown region in August 2014 alone, to check their compliance with employment and immigration laws.

The Ministry has stated “The level of non-compliance identified during this operation was disappointing … It is surprising that there are still employers who do not have written employment agreements and are failing to maintain records compliant with minimum standard legislation” (MBIE acts against Queenstown breaches of employment laws, 25 November 2014)

With an increasing focus on these surprise workplace assessment visits, all businesses need to ensure they are compliant with employment legislation, to avoid a Christmas or New Year surprise they’d rather not get. Let’s look at one key area all businesses can easily be compliant in:  Employment Agreements.

 

Employment Agreements

An employment agreement sets out the terms and conditions of the job for each employee.

The law requires all employers to provide a written agreement to employees, no matter what kind of job or hours they perform. This is often an individual employment agreement, but if your business is a party to and your employee’s work is covered by a collective agreement, then you must inform the employee of this, that they may join the Union, how they can contact the Union, and that they will be covered by that collective agreement for the first 30 days of their employment.  After 6 March 2015 this will change so that an employee is not automatically covered by the collective for the first 30 days of their employment and can immediately enter into an agreement with you individually.

At the time of giving an employee a copy of any individual employment agreement, an employer must:

Advise the employee they are entitled to seek independent advice and a reasonable opportunity to do so:
Consider any issues raised by the employee and respond to them:
Inform the employee of their entitlements under the Holidays Act and that they can obtain further information from any Union or MBIE
Employers should retain the signed version of the agreement and provide the employee with a copy of the agreement for their own records.

 

What does an employment agreement need to include?

The terms and conditions of the agreement are by agreement between an employer and employee but there are a number of matters the law requires the agreement to set out.

An individual employment agreement must include:

The names of the employee and the employer concerned;
The position of the employee;
A description of the work to be performed by the employee;
An indication of where the employee is to perform the work;
What hours the employee will be required to work;
How and what the employee will be paid for the work;
A description of how public holidays are remunerated; and
A plain language explanation for the services available for the resolution of employment relationship problems, including a reference to the 90 days that an employee has to raise a personal grievance.
Despite reports otherwise, an employer CANNOT contract out of any of the minimum entitlements provided by law i.e., if the agreement provides for time and a quarter payment for a public holiday rather than time and a half and the employee signs the agreement, the employee can still claim time and a half for the public holiday worked

Tip: Did you know a 90 day trial period will only be valid if it is agreed to in the employment agreement and signed before the new employee starts?

 

Penalties

The financial penalties for not complying with employment laws are up to $10,000 for individuals and $20,000 for companies.   Can you afford not to get an employment agreement in place?

Short Answer:  No.

If you do not have employment agreements in place for all employees, including casual and fixed term employees, feel free to contact someone from our team to assist. Likewise if you have an old agreement template, consider having this updated.

 

Disclaimer: We remind you that while this article provides commentary on employment law topics, it should not be used as a substitute for legal or professional advice for specific situations. Please seek guidance from your employment lawyer for any questions specific to your workplace.

The Employment Court in Austin v Silver Fern Farms Limited [2014] NZEmpC 30 has turned the spotlight on an ACC accredited employer and how that role relates to the core employment obligations such as good faith.

FACTS OF THE CASE:
Silver Fern Farms Limited (SFFL) was an accredited employer for accident compensation purposes. This means an employer assumes what would otherwise be the rights and obligations of the Accident Compensation Corporation (ACC) in respect of its employees’ work-associated accidents. SFFL’s specific scheme directly linked the employee’s incapacity as a result of an accident and the employment relationship, including potentially its termination.

Mr Austin, a SFFL employee, was involved in a non-work related accident from go-kart racing in January 2009. This resulted in bruising to his backside. Mr Austin continued to work normally at SFFL until he injured his back at work nine days later. Mr Austin then claimed accident compensation coverage from SFFL which was granted. SFFL later became aware of the bruising from the non-work related incident through a medical report and discontinued the compensation. They concluded that the current incapacity arose from the non-work related injury rather than the work related injury.

Mr Austin was terminated for medical incapacity in August 2009. He raised a personal grievance for unjustified disadvantage and dismissal however the personal grievance was raised after the legislative 90 day time limit had expired.

THE COURT’S DECISION

The Court was required to decide whether they would grant leave to the employee to pursue his personal grievance outside of the 90 day time frame. In doing so the Court needed to decide firstly whether exceptional circumstances existed and secondly whether it was just to grant such leave.

In determining the above matters the Court recognised the complex inter-relationship of the Employment Relations Act 2000 (ERA) and The Accident Compensation Act 2001 since SFFL was an accredited employer. Because the accident coverage scheme was part of Mr Austin’s terms and conditions of employment the Court determined decisions made in regard to this must attract the good faith requirements.

SFFL was required to deal with Mr Austin in good faith, to not mislead or deceive him or to do anything that was likely to mislead or deceive him, whether directly or indirectly. SFFL were also required to provide Mr Austin with all relevant information before they made the decision to cease accident compensation coverage and provide Mr Austin with an opportunity to comment.

The Employment Court determined that exceptional circumstances did exist and it was just to allow the grievance to be raised out of time.

WHAT DOES THIS MEAN FOR YOU?

If you are an ACC accredited employer the obligations of good faith apply to the decisions you make under that scheme. For example an employer that is making a decision about coverage and compensation needs to tell the employee any decisions they are proposing to make, provide the employee with all the relevant information and give the employee an opportunity to comment before they make that decision.

Relevant information could include medical reports, the relevant job description, rehabilitation information etc. Put simply, anything the employer will be considering when they make their decision must be put to the employee for comment before any decision is made.

This decision is significant because the ACC legislation does not specifically require ACC to act in good faith and provide the employee with an opportunity to comment on all relevant information. Accredited employers are therefore held to a different standard than ACC.

Disclaimer:  We remind you that while this article provides commentary on employment law topics, it should not be used as a substitute for legal or professional advice for specific situations.  Please seek guidance from your employment lawyer for any questions specific to your workplace.
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The recent Employment Court case, Rainbow Falls Organic Farms Limited v Rockell overturned the Authority decision to award $42,793.12 in lost wages and found that Mr Rockell had not shown he had worked the extra weekends or public holidays that were claimed.

 

Facts

Mr Rockell was dismissed from his position of Farm Manager at Rainbow Falls in May 2011. The dismissal related to Mr Rockell tipping and/or lopping off horns of several of the cows against the Farm Owner, Mr McKenzie’s, wishes. Following his dismissal Mr Rockell claimed a considerable amount of money was owed in wage arrears in accordance with section 131 of the Employment Relations Act 2000 (the Act). Mr Rockell claimed that he:

Worked a full day on every public holiday, even when the cows were dry (equating to 52 days),
Accrued 10 weeks annual leave, having had no annual leave in the first half of May 2007, only two weeks annual   leave in 2008, 2009, and 2010 and no annual leave in 2009,
Worked 68 weekends which he was otherwise entitled to have off.
Employment Court Decision

The Employment Court analysed section 132 of the Act which states that where an employer has failed to keep wage and time records and that failure has prejudiced the employee’s ability to bring an accurate claim, the Authority or Court may, unless the defendant proves that those claims are incorrect, accept as proved all claims made by the employee in respect of the wages actually paid and hours, days and time worked. The Authority had no trouble relying on this section in favour of Mr Rockell, however the Employment Court chose to focus on the word ‘may’ and decided that the section was discretionary rather than mandatory.

The evidence established that there was never any requirement imposed by the plaintiff for Mr Rockell to work on a weekend he would normally be entitled to have off. Mr Rockell was in a managerial position and ran the farm on a day-to-day basis. He confirmed in cross examination that he organised his own leave around his work commitments and was effectively in complete control.

Mr McKenzie’s evidence, which the Court accepted, was that Mr Rockell was never required to work on any weekend that he would normally be entitled to have off and that he was never informed that Mr Rockell had worked on a statutory holiday. Mr McKenzie believed that Mr Rockell was taking leave when the farming commitments allowed.

It is clear from the judgment that Mr Rockell did not come across as a credible witness, making a large number of admissions while under cross examination. The Judge also noted that it was simply not credible that, if Mr Rockell had leave owing (particularly significant quantities of leave), he would not have raised it much sooner, rather than waiting until a very late stage.

Judge Inglis went so far to say that even if she accepted that Mr Rockell did not work public holidays and failed to take annual leave or take days in lieu as claimed (which she did not), it is clear that that election was entirely his own.

Judge Inglis concluded that she was not satisfied that Mr Rockell actually worked on the public holidays or weekends claimed, or that he had any outstanding annual leave entitlements as he asserted. She chose not to apply s 132 of the Act in favour of Mr Rockell. The only monies that the Court awarded were the unpaid notice period which came to a total of $4,583.00 plus interest. This is a far cry short of the $42,793.12 that was originally awarded in the Authority.

While this case did turn out in favour of the employer, it is a timely reminder that timesheets and wage and time records are so important, especially when you are a Farm Owner with limited day to day contact. Had the employee had proof of public holidays worked, and leave taken, the outcome may have been significantly different. If you struggle to keep these records or keep up with the legislation in regards to leave and public holidays, consider outsourcing your payroll. Please do not hesitate to contact us if you would like more information about a payroll provider.

 

Disclaimer: We remind you that while this article provides commentary on employment law topics, it should not be used as a substitute for legal or professional advice for specific situations. Please seek guidance from your employment lawyer for any questions specific to your workplace.

 

 

By Lucia Vincent

Everyone wants those whom we love and trust to remain faithful. No one likes being betrayed – even our pets must live up to our expectations of fidelity.

But do we accept unfaithfulness and disloyalty in some situations? Do I mind if my dog prefers someone else’s company if it means she’s stopped barking? Is it ok to cheer for Australia when they are playing France? Should values like faithfulness and loyalty apply to our employment relationships too?

Within our workplaces most would condemn an employee who sets up their own business based on relationships with their employer’s clients while working.

But what if an employee’s personality and long hours are the main reason those relationships flourished? What about promises from clients and colleagues to join a manager in their new venture – is it fair to forget to pass on knowledge of that allegiance to your soon-to-be former employer?

Some may feel as though they could morally justify their behaviour because they worked hard without recognition or didn’t get the pay rise they deserved. But they would be forgetting about the duty of fidelity and how much breaching it can cost them if their employer takes disciplinary or other action against them personally, not to mention the devastating affect on their employer’s business.

Gotta have good faith
Parties to employment relationships must deal with each other in good faith even if a written agreement fails to say so. The Employment Relations Act 2000 (Act) codified good faith early on saying that at the very least an employer and employee cannot directly or indirectly do anything that is likely to or actually misleads or deceives the other.

In 2004 the Act added to its key provisions – that good faith goes beyond the implied mutual obligations of trust and confidence. Good faith requires parties to actively and constructively establish and maintain a productive employment relationship in which they are, among other things, responsive and communicative.

But before Parliament even put pen to paper, the Courts recognised the duty of fidelity in employment relationships. Being faithful means that an employee must act in the best interests of their existing employer. This precludes an employee from using their employer’s time to conduct activities in competition or using business opportunities that arose during employment to personal advantage (unless an employer expressly consents to it).

It also requires an employee to inform their employer of all information relevant to the business. Relevant information would include an existing client promising business to an employee after they have left or an opportunity arising during work time to secure a commercial opportunity personally or for the benefit of another party.

Being faithful to your employer does not necessarily prevent an employee from taking steps outside of work hours to prepare their business if they only start competing after they leave.

But an employee must be careful not to go too far and needs to be aware of any other duties. For example, for an employee to work on obtaining business from their employer’s clients before they actually finish work would be too far, and any operative restraint of trade can hamper attempts to compete post employment. The extent of the duty of fidelity depends on the circumstances in the specific employment relationship, but it usually stops at termination.

Passively stealing customers is not OK
But it’s ok if customers come to you, right? Aaah, not if you are still employed.

The Court of Appeal has made it clear that a Sales Manager could breach the duty of fidelity by failing to pass on a key client’s concerns and going on to personally gaining by obtaining significant work with that unhappy client (to the detriment of their employer), all prior to resignation:
It is of no moment who makes the first approach. The duty of an employee in such circumstances is to reject categorically any such approach, to report it to his or her employer along with any criticisms made of the employer and to work with the employer to rectify any perceived shortcomings.1

So it seems pretty clear that employees must be wary about inappropriate customer loyalty and report any approaches from customers to their employer. This enables the employer to deal with any difficulties appropriately and smoothly transition customer relationships with the assistance of their employee.

An employee’s premature exit (such as abandoning their employment), accompanied by key clients, is quite likely to breach the duty of fidelity that is likely to require an employee to ensure a smooth transition before leaving, especially senior staff with an ability to materially influence clients.

Best be discreet about leaving Senior staff tempted to tell their direct reports, clients and suppliers they’re leaving before they tell their employer? Exiting employees should consider keeping mum or at least being more discreet about their plans to depart, especially where they haven’t told their boss yet.

The Court of Appeal has confirmed that an employee can be disloyal by telling staff before their boss that they are leaving and approaching various suppliers to see if they would supply the employee’s new business. Canvassing suppliers and causing rumours to start circulating about what might be going on at your employer’s business can be seen as undermining your employer’s reputation and good will. It could be made worse where an employee is a Manager with access to confidential financial and marketing information and a foreseeable risk exists that reporting staff may leave too:
It is one thing to plan to leave your employer and set up a competing business if you proceed with discretion. It is quite another, in my view, to do so in such a way that your plans become widely know but without telling your employer, and in a way which is potentially damaging to your employer.2

Breaches costly
Breaching the duty of fidelity could result in an employer justifiably taking disciplinary action against an employee. If it’s serious enough it could result in summary dismissal.

Leaving anyway? An employee should start worrying if they have taken steps to undermine their employer before they have left because any proven breaches could cripple that employee financially.

Recently the Employment Court demonstrated its willingness to award substantial damages (nearly $4.3 million) against employees who were found to have breached their duty of fidelity resulting in losses to their former employer.3

Among many steps taken by the three senior managers found to have breached the duty of fidelity, were securing customers and staff for their own company whilst employed and taking or deleting key company information used to undercut quotations made by their employer to gain work for their new business.

In an earlier decision the Employment Court stated that all three managers owed an implied duty of fidelity and an obligation to act in good faith that prevented them from making approaches to clients or potential clients of their employer on behalf of their new company before they stopped working. This potentially included approaches to prospective clients due to “… circumstances in which top management may not profit from business opportunities that became known to them while in previous employment.”4

Senior employees ought to exercise additional caution when aware of another employee’s breach too:
If an manager or senior employee observes actions that are harmful to the employer it is no great extension of the duty of fidelity or trust and confidence to require that employee to report that conduct to the employer (sic).5

Discouraging Disloyalty
Even without a written agreement telling staff and employers to behave in good faith – you just gotta!

The substantial remedies available to employers who suffer loss as a result of an employee beaching their duty of fidelity should discourage employees (and especially senior staff) who might undermine their existing employer to boost their new venture by taking key clients, staff and/or information.

Even if an employee feels indignant about a lack of recognition or paltry pay rates, these factors alone would rarely, if ever justify failing to act in their employer’s best interests while at work. Like any relationship, the parties to an employment relationship must rely on a mutual trust and confidence.

An employee tempted to poach staff, steal customers or even speak openly about their departure plans with suppliers, should remind themselves of the consequences if caught – not only might they lose their job, but they could face costly claims for damages too.

References:

At 38, Morris v Interchem Agencies Ltd [2003] 1 ERNZ 93.
At 518, Big Save Furniture Ltd v Bridge [1994] 2 ERNZ 507 (CA).
Rooney Earthmoving Ltd v McTague [2012] NZEmpC 63.
At 120, Rooney Earthmoving Ltd v McTague [2009] ERNZ 240.

Disclaimer

We remind you that while this article provides commentary on employment law topics, it should not be used as a substitute for legal or professional advice for specific situations. Please seek guidance from your employment lawyer for any questions specific to your workplace.

First published in The Otago Daily Time – 7 September 2012
http://www.odt.co.nz/news/business/224908/law-blog-being-faithful-your-e…