EMPLOYMENT LAW NEWS

August 2005 Issue No: 3

Last month we mentioned that we would discuss employment agreements this time around. This is because when it comes to dishing out penalties for failure to comply with the requirements of the Employment Relations Act 2000 (ERA), the Employment Relations Authority is no longer sympathetic to employers who say in defense that “they did not know”. The employees are allowed to say that, but that is because an employee’s ignorance of the law is almost always treated as the employer’s fault.
Whereas a drink driver might be fined $600 - $700, an employer might be penalised up to $1000 simply for not having the employment agreement in writing. Never mind if there is no consequence as a result of the failure because the failure by itself is enough. The maximum penalties available are up to $5,000 for an individual trader and $10,000 for a company.
An even worse example is this; under the Holidays Act 2003 there is a legal requirement to ensure from the 1st April 2004 all employment agreements have a clause that tells the employee that if they work on a Public Holiday they are entitled to time and one half their relevant pay. So not only are there penalties for not paying time and a half, there are penalties for not informing employees that they are entitled to the time and a half.
Further, now there is a provision in the Employment Relations (No 2) Amendment Act 2004 (“Amendment Act”) requiring all employment agreements to have an employment protection clause inserted no later than 1st December 2005. This clause is designed to protect ‘vulnerable workers’ as outlined in the Amendment Act, and ‘other workers’ in the event that the business is restructured.
The difference between ‘vulnerable workers’ and ‘other workers’ is that the ‘vulnerable workers’ can elect to transfer their employment terms to a new employer in a contracting out situation, thereby providing protection by way of ongoing employment with a new employer. The ‘other workers’ protection clause however in the Amendment Act actually provides no protection for employees at all. There is no penalty for non compliance with this section, how the law develops in this area remains to be seen.
The most important thing for employers to notice with regard to employment agreements is that they are held wholly responsible for ensuring compliance with the ERA. The employee need not know anything about this requirement, but can bring penalty actions against employer’s for non compliance if they choose to once they know of this requirement.
For example, often claims made against employers by employee’s (usually in the personal grievance field) are bolstered with penalty claims for not providing a written agreement, and used as a bargaining tool to get some money from the employer.
The penalty is usually paid to the Crown unless the ERA considers it appropriate to order part or all of it to be paid to the employee.
Sections 63A and 65 of the ERA, which relate to employment agreements, need to be read together. Section 65 sets out what the minimum provisions in writing must be. But in fact the minimum provisions are not all listed. For instance the time and a half provisions are not mentioned and the employment protection clause requirement is not mentioned, to name but two. When the government visited Section 65 during the “fine tuning” exercise to the ERA last year, it only amended the Section to ensure that unions could have their union fee’s deducted by the employer and paid to the union. No concern was given by the government to the possibility that the Section did not fully reveal the minimum requirements, thus making it difficult for employers to know the full extent of their obligations with regard to employment agreements.
So what this all means is that if you don’t have written employment agreements in place and a dispute as to entitlements arises, the employer will likely find themselves having to disprove the employee’s claim. Just as wage or holiday pay claims brought against employers who have not kept proper records (as required by law) places the burden of disproving the employee’s claim, the same will apply in situations where no written agreement has been provided if a dispute arises as to rights and obligations.
Finally it should be noted that when offering employment to a “prospective employee” (that is a person who has not accepted the offer at this point) employers are required to consider any ‘issues’ raised by the prospective employee. If the employer fails to consider the ‘issues’ then whether the employee ends up with the job or not, they can take a penalty action against the employer. In the ERA and Amendments (not mentioning the other employment statutes) there are over 20 penalty provisions!

A REMINDER -
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