A bill is being considered by Parliament which would allow higher income earners to contract out of the personal grievance provisions of the Employment Relations Act 2000 (“the Act”).
If the Bill passes, it would mean that employees who earn a gross salary over $150,000 would be able to contract out of the personal grievance provisions. For employers, it would remove the risk of costly personal grievance claims. The ability to contract out, would need to be on terms agreed to by the employee.
For any contracting out arrangement to be enforceable, the Bill provides that:
- The agreement must be in writing;
- The employee must have had independent legal advice; and
- The lawyer who gave that advice must have certified that he/she explained the effect and implications of the term and witnessed the employee’s signature.
The idea behind the Bill is that it well paid senior executives are not vulnerable workers that need the government’s protection. Allowing for pre-agreed and negotiated exit arrangements for those employees who are skilled enough (as the National Government sees it) to command a high salary recognises that those employees should be capable of negotiating agreements themselves.
In our view, the Bill would likely create a situation where higher earners are better able to receive and negotiate large “golden handshakes”, whereas other employees are effectively restricted in terms of the compensation they can receive under the Act.
As the Bill stands, it would not only prevent personal grievances for unjustified dismissal, but also claims for unjustified disadvantage including grievances for discrimination and harassment. Arguably, it allows an employer to contract out of basic human rights. This is different from the equivalent legislation in Australia which prevents higher earners from bringing claims for unfair dismissal but does not prevent claims for discrimination.
The Bill has now passed its first reading in Parliament.