In 2004, it became compulsory by statute for all employment agreements to contain an EPP for employees (the exception being for “vulnerable” employees, being predominantly those in the cleaning and food catering industries). The intention of the legislation was that an EPP would give greater protection to employees in certain business transfer situations by requiring the employment agreement to set out a process the employer must follow when discussing employment issues with the other party which is acquiring the business or the outsourced work.
Until recently, the consequences of there being no EPP in agreements have been unknown. However, a recent decision of the Employment Relations Authority makes it clear that not having an EPP can have major consequences, including preventing restructuring.
In this case, the Pulp and Paper Workers’ Union and a large employer had not agreed on an EPP, despite many attempts to negotiate one into their collective agreement. The employer proposed to contract out part of its services to a third party. The union argued the employer couldn’t properly consult with the third party in the absence of an EPP and therefore the outsourcing could not go ahead. It reasoned that an EPP was meant to deal with the process the employer would follow when dealing with the new potential employer, and, without such a process, consultation could not properly occur.
The Authority agreed with the union and found that an EPP is a fundamental first step in any restructuring process. Without it, an employer is unable to know what its obligations are, let alone comply with them. The Authority held that if it did not come to that conclusion, the effect would be that the employees would have been denied the right to protection which the Act expressly conferred on them.
That meant the employer was prevented from implementing its contracting out plan, until an EPP was successfully negotiated in a new collective agreement.
This case is on appeal but in the meantime all employers (especially those contemplating a restructure) need to ensure their employment agreements contain an EPP. As the law currently stands, it may only take one employee who lacks an EPP, to stop the sale of a business from proceeding.