Proposed amendments to Employment Relations Act
Kaimai_Law_Bethlehem_FinePrint_Autumn_2013.pdf
The latter part of 2013 is set to herald the partial reform of Part 6A of the Employment Relations Act 2000, which currently offers special protection to people who are classified as ‘vulnerable workers’. This article discusses why owners of small to medium
sized enterprises should be aware of the government’s proposals.
The proposed legislative changes to the Employment Relations Act form part of a group of wider measures designed to expand the rights of workers to request flexible working hours and to promote an environment which is more conducive to collective bargaining. But what, or more accurately ‘who’, is the ‘vulnerable worker’, and why is it particularly important for owners and/or potential owners of small to medium sized businesses of less than 20 employees (SMEs) to be aware of the government’s proposed legislative amendments?
Who are vulnerable workers?
The phrase ‘vulnerable worker’ is a colloquial term that describes people employed in what are typically low paid jobs within the cleaning, catering, orderly and laundry industries. These categories of employees (and the circumstances in which they are covered),are set out in Schedule 1A of the Act.
Part 6A of the Act is designed to provide continuity of employment protection for these workers. It also protects them from the possibility of being replaced by cheaper contractors and/or from having their remuneration and working conditions reduced if the company for which they work is either restructured or ultimately sold. In these circumstances, the current legislation allows vulnerable employees to choose to transfer their employment to the new employer on the same terms and conditions as their previous employment.
The existing vulnerable workers’ provisions have been criticised for being difficult to understand and for creating uncertainty concerning staffing levels, expenditure and inherited liabilities. Relating to these concerns is the belief that SMEs have faced greater proportional costs than larger businesses that have adapted more effectively to the current legal requirements.
The Act currently applies to all New Zealand businesses, yet in what’s regarded as one of the more controversial amendments proposed by the government, SMEs will be specifically exempted from Part 6A in instances where they are the incoming employer. It’s estimated that employees in these businesses account for about one quarter of the ‘vulnerable’ workforce. This change is likely to be welcomed by SME owners. Let’s look at an example below of how this might work for those companies.
Clean It example
Under the current law a small cleaning company (Clean It Limited) which successfully tenders for a cleaning contract may be required to retain any cleaners previously employed by the former contract owner. Not only does this mean that there’s potential for Clean It to inherit underperforming employees, but it also exposes Clean It to a greater risk of unanticipated financial liabilities generated by the transfer process.
According to the proposed amendments, Clean It would be entitled to cherry-pick any staff who they wished to retain; the company would no longer have an obligation either to employ cleaners affected by the restructuring, or to meet any of their entitlements under their existing employment agreements. In these circumstances businesses like Clean It will no longer have the same compliance costs and are likely to have an advantage over larger companies in the tendering process.
Unfair say large business owners
Not everyone, however, is as enthused about the proposed reforms as the majority of SME owners are likely to be. The existing laws designed to protect vulnerable workers will still apply to large businesses. Commentators have argued that the disparate treatment of employers under the proposed changes is anti-competitive and acts as a barrier to productivity.
It’s perhaps therefore unsurprising that business lobby groups such as the Business Roundtable and Business New Zealand have from the outset argued that all of Part 6A should be repealed. In the meantime, it will be interesting to see what sort of corporate structures arise in order to circumnavigate the continued application of Part 6A.
To find out more about how the proposed amendments to Part 6A may affect your business, go to the Ministry of Business, Innovation and Employment’s website at www.dol.govt.nz, or feel free to contact us.
