The Government has now passed its amendments to the Employment Relations Act 2000 (the ERA) and the Holidays Act 2003. The majority of these changes will come into effect from 1 April 2011.
Highlighted below are a number of key changes proposed under both Acts.
Under the current law, unions have very broad access rights to workplaces. Although there are requirements for the union to be reasonable when accessing sites, employer consent is not currently required. However, from next April, that will change. A union representative will need to make a request for access rights and, without the employer’s consent, no right of access will exist.
Employers will not be able to unreasonably withhold their consent and, if they do decline a request, must provide reasons in writing no later than one day after the request was received. If an employer does not respond to the union’s request within two working days, consent will be deemed to have been given.
The amendments also clarify when an employer can communicate with its staff during bargaining. The amendment makes it clear that employers do have the ability to communicate with their staff about bargaining matters (including their own proposals). However the employer will still need to recognise the union and will need to ensure that any communications do not constitute “negotiations” and do not undermine the union or the bargaining itself.
There will be a change to the legal test to justify a dismissal. Currently the law requires that the dismissal must be what a reasonable employer “would” have done in all the circumstances. The new test will require an employer to satisfy the courts that their decision was one that a reasonable employer “could” have reached.
The Government has justified this change on the basis that, where dismissal is within the range of options a reasonable employer could decide upon, the courts should not impose a different outcome.
In our view, this means employers should be able to make decisions in cases which are not quite so clear cut with greater confidence.
The amendment will also make it clear that “reinstatement” is no longer the primary remedy for unjustified dismissal.
Employers are often frustrated by the importance the law places on following a fair process.
To assist employers, the ERA will include a list of factors the courts must consider in deciding if a process was fair. The aim is to provide greater clarity about what is required.
The courts will also be specifically directed not to find a dismissal unlawful if there were only minor defects in the employer’s process.
Smaller employers will also be pleased to learn that when the courts have to assess if a dismissal was justified, one factor they must take into account are the resources available to the employer.
Extension to 90 day trial periods
Probably the most controversial amendment to the ERA is that 90 day trial periods will be available to all employers, regardless of size (currently only businesses employing less than 20 staff can use the ERA’s trial period). From 1 April 2011, every employer will be able to dismiss a new employee within a trial period without cause so long as the decision is not discriminatory. That dismissed employee will have no ability to pursue an unjustified dismissal claim.
However the 90 day trial period may not represent quite as large a ‘get out of jail free card’ as many believe. As our article elsewhere in this newsletter discusses, there are a number of requirements that will need to be met before a ‘safe’ dismissal can occur in reliance on a trial period. Care will still be needed.
Cashing up the fourth week of annual leave
Currently, there is no ability to cash up the annual leave entitlements provided by the Holidays Act. However, from 1 April 2011, employees will be able to request to have a maximum of one week of their four weeks of annual leave paid out.
That fourth week must already have accrued and the request must be made by the employee – it can not be at the employer’s request. Employers are not obliged to accept the request.
Relevant daily pay
Relevant daily pay (RDP) is the rate paid for public holidays, alternative holidays, sick leave and bereavement leave. RDP is based on what the employee would have been paid if they’d worked on that particular day.
This definition has caused some employers significant expense. Those employers who pay regular overtime, allowances and commission have faced a hefty increase in costs, as staff have often taken their alternative holidays (and sometimes sick leave) at times when their RDP is at its highest.
However, from 1 April, if it is not practical to determine an employee’s RDP or their daily pay varies within each pay period, then the employer instead is to pay for these days using Average Daily Pay (ADP). This is, in essence, gross earnings over the previous year divided by days worked in that year. This formula will remove much of the incentive to take leave on the best paying days and should limit the windfalls some employees currently receive.
In addition, employees will no longer be able to determine when they will take alternative holidays. Except where agreement can be reached on when the day is to be taken, the alternative holiday will be taken on a day determined by the employer, acting reasonably.
The Holidays Act will allow employers to request proof of an employee’s sick leave at any time (so long as they are prepared to pay for it). This will mean that a medical certificate can be asked for by an employer whenever it sees fit.