Employment Law Update

By Claire Mansell - 11 Feb 2011

Parliament has passed several amendments to the Employment Relations Act and the Holidays Act. The amendments come into effect on 1 April 2011 and mean big changes for both employers and employees.

This newsletters covers:
• 90 day trial period - not as easy as it sounds
• Process quicker and more streamlined
• Employment Relations Authority more employer friendly?
• Cashing in 4th week of annual leave
• Proof of sickness
• Other changes to the Holidays Act

90 Day trial period - not as easy as it sounds

From 1 April 2011, all employers will be able to use the 90 day trial period clause for new employees. Under this clause, an employee dismissed within the first 90 days of employment cannot raise a personal grievance about the dismissal.

But be warned, 90 day trial periods are not as easy as they sound. First, you need to include a 90 day trial clause in the respective employee's employment agreement. Then the employee needs to agree to this clause and sign their employment agreement before they walk in the door on their first day.

Also, you cannot use the trial period if the employee has previously been employed by you.

Even if you do everything right, an employee can still bring a successful personal grievance. See our article of 8 September 2010 for an example.

Process quicker and more streamlined

The Mediation Service and Employment Relations Authority process will become more streamlined and user friendly. The changes include:

• Mediators having more power to make recommendations.
• An independent third party (the mediator) will be able to give a view on the merits of each party's position while they still have the opportunity to resolve the issue themselves.
• Mediation being promoted as an early problem solving mechanism without the need for legal representatives, thereby reducing costs.
• The Employment Relations Authority being able to throw out frivolous or vexatious claims.

Hopefully this will reduce the number of employees taking a personal grievance of little merit in the hope of a payout from the employer.

Employment Relations Authority more employer friendly?

Changes to the legal tests should make it easier for the employers if their matter does reach the Employment Relations Authority.

The legal test for determining whether an employer acted fairly being based on what a fair and reasonable employer 'could' do, rather than what it 'would' do.

This implies there will be more than one 'reasonable' course of action available to employers. Under the current law, there is only one "reasonable" course of action available - and that is what a reasonable employer 'would' do.

Also, reinstatement will no longer be the primary remedy for unjustified dismissal.  Reinstatement, especially interim reinstatement has been a major concern for employers. Once the person has gone the employer does not want them back.

It follows that if reinstatement is no longer the primary remedy, the threshold for resisting reinstatement may be become lower.

Cashing in the 4th week of annual leave

Employees will be able to request to exchange their 4th week of annual leave (in whole or in part) for cash. The employee must make the request (not the employer), and it must be in writing.

The employer does not have to agree to the request and may put in place a policy that prevents the payout of the 4th week of annual leave.

The 4th week of annual leave does not need to be paid out as a week-long block. For example, an employee can have 3 days paid out, and in 6 months' time, have the remaining 2 days paid out.

Once an employee has put a request in writing, the employer must consider the request in a reasonable time. The employer must advise the employee, in writing, whether their request is approved or declined.

Proof of sickness

Employers who suspect an employee is abusing their sick leave entitlement will be able to require proof of sickness (usually a medical certificate) from the employee in the first 3 days of sick leave. The employer no longer needs to have reasonable grounds for suspecting that the sick leave is not being taken for genuine sickness.

If the employer does require proof of sickness, they are responsible for paying the reasonable costs of obtaining a medical certificate.

However, these rules only relate to the employee's first 3 days of sick leave. After 3 days, the employer has an automatic right to request proof of sickness (payable by the employee).

Other changes to the Employment Act

Other changes to the Holidays Act include:

• Clearer rules about transferring public holidays for workers whose shift covers two days.
• Clearer rules about what is and is not a working day.
• Higher penalties for breaching the Holidays Act - all existing penalties will be doubled.

If you require any further information, or have any questions about how the decision could affect you, please contact Claire Mansell or your usual contact at Martelli McKegg on 09 379 7333.