Zero hour contracts - What does this mean for employees and employers?

“Zero hour” contracts in the past required employees to be available for work offered, without compensation for being available, and without some guaranteed hours. 

Under the new rules such zero hour contracts are illegal.  The changed rules aim to make it fairer to employees, while still allowing flexibility for an employer by allowing “availability clauses”.

The rules changed back in April 2016 and all employers must comply with the much tighter laws on these clauses.  However, we have noticed that several employers are still failing to comply with the changed requirements for “zero hour contracts”.  This article sets out some of the changed rules about zero hour contracts and some potential pitfalls to avoid.

Agreed hours

Employers are now required to include into any employment agreement the hours of work which have been agreed between the parties, including:

• guaranteed hours;
• days of the week on which work is to be performed;
• start and finish times; and
• any flexibility in any of these factors.

Flexibility

An availability clause allows the parties to have some flexibility in the agreed hours.  For example, where the employer cannot know in advance exactly how many hours the employee will be required for.

An availability clause requires the employee to be available to accept work over and above some guaranteed hours of work. 

Availability clauses are only enforceable if:

• the employer has genuine reasons, based on reasonable grounds, for including the clause into the agreement;
• the employee gets reasonable compensation for making him or herself available; and
• the employee also has some guaranteed hours.
  What is considered as “genuine reasons, based on reasonable grounds” depends on:

• whether it is practical for the employer to run the business without the availability clause;
• the number of hours the employee is required to be available; and
• the number of guaranteed hours.
  What is considered as “reasonable compensation” depends on:

• the number of hours the employee is required to be available;
• the number of hours the employee is required to be available compared to guaranteed hours;
• the nature of restrictions on the employee (e.g. stay within proximity, no drinking, etc.); and
• the remuneration for availability.

If there is no “availability” clause in the agreement, any additional hours offered to the employee can be refused, and the employee must not be treated adversely (differently from other similar employees).

Employers need to be careful that they are not confusing permanent employees subject to an availability clause, with casual employees or vice versa. Casual employees have no obligation to be available, unlike employees subject to an availability clause. 

If you are uncertain, it is best to get advice early to avoid problems later on, because the amendments have also increased the powers of Labour Inspectors to ensure compliance with the new rules.

The penalties have also been increased to motivate employers to follow the new rules.  In some instances penalties may be up to $50,000 for an individual; or for a company up to $100,000, or three times the financial gain made as a result of the breach. 

A person may also be banned from entering into an employment agreement as an employer, being an officer of an employer, or being involved in the hiring or employment of employees, for up to 10 years if they commit serious or persistent breaches. 

It is clear that getting things right is important.  Employers are advised to check all their employment agreements currently in place to make sure that they do not need updating and to get assistance from an experienced employment professional to get the wording right if necessary.

Jaenine Badenhorst

Employment Lawyer Wellington

What are my obligations to complainants during a disciplinary investigation…

An employer owes many obligations to an employee. An employer must treat an employee fairly and reasonably, and must maintain a relationship of trust and confidence.

 

These obligations continue throughout the employment relationship, including during a disciplinary investigation. The employer should, where possible, ensure the investigation is kept confidential, provide the employee with information about any allegations, and give the employee an opportunity to comment on the allegations and what course of action is to be taken.

 

But what obligations do employers owe complainants during a disciplinary investigation?

 

An employer’s obligations towards a complainant can often become blurred when they conflict with the obligations they owe to an employee under investigation, such as their right to privacy.

 

Generally, employers are not required to disclose information about an investigation or what disciplinary action is being taken, if any.  However, at a minimum, an employer should inform a complainant that they are fully investigating the matter, and that appropriate action will be taken. At the end of the investigation, employers should inform the complainant about the general outcome of an investigation, for example whether the allegation has been upheld, in full or in part.

These obligations to complainants are especially important where the complainant has a vested interest in the result. Where a complaint relates to allegations of sexual harassment, bullying, or racial discrimination, an employer has heightened obligations towards a complainant. The employer must keep the complainant fully informed about the investigation process and must advise them about the outcome of the investigation and what action has been taken.

It is important to remember the obligations you owe to employees, especially during an investigation process as any breach may result in an employee raising a personal grievance.  

Mikayla Turner

Employment Lawyer Wellington

ERA orders party to comply with settlement agreement…

The Employment Relations Authority has issued a compliance order after a party to a settlement agreement failed to meet its obligations under the agreement.

The parties had previously attended mediation and entered into a final, binding and enforceable agreement which was signed by a Mediator from the Ministry of Business, Innovation and Employment.

The ERA ordered the breaching party to comply with the Record of Settlement however noted that some of the clauses in the agreement could not be enforced as the ERA has no jurisdiction to order compliance against third parties who are not party to a Record of Settlement.

The ERA was also concerned over the fact that there were no timeframes in which certain actions had to be completed under the agreement. This also made some clauses in the agreement difficult to enforce. Accordingly, the ERA refused to impose any penalties upon the party in breach of the agreement.

Alan Knowsley

Employment Lawyer Wellington

Employee unjustifiably dismissed for falling asleep at work…

The Employment Relations Authority upheld an employee’s personal grievance claim for unjustified dismissal after he was immediately dismissed at work for taking a nap during his smoko break.

The employer found that the employee’s behaviour constituted gross misconduct and noted that it negatively affected the morale of other staff.

The ERA held that the employer failed to act as a fair and reasonable employer could have in all of the circumstances by failing to raise the matter with the employee, and for failing to give the employee an opportunity to respond.

The ERA ordered the employer to pay the employee over $6,000 for lost wages plus $5,000 in compensation for hurt and humiliation.

Alan Knowsley

Employment Lawyer Wellington

Not considering explanation costs $20,000 and 8 months wages…

An employee of 13 years’ service was dismissed after an allegation she released confidential documents to the media.

The Employment Relations Authority upheld the employee’s personal grievance claim for unjustified dismissal but refused to reinstate her.

The ERA found that despite raising their concerns with the employee, and providing the employee with an opportunity to respond to their concerns, the employer did not genuinely consider the employee’s explanations.

The ERA found that the employer was biased against the employee and may have predetermined the outcome of the disciplinary process. The failure to genuinely consider the employee’s explanation was fatal to the employer’s process.

The ERA ordered the employer to pay the employee 8 months lost wages plus $20,000 in compensation for hurt and humiliation. If the employer had kept an open mind during the process all these costs may have been avoided.

Alan Knowsley

Employment Lawyer Wellington

$25,000 penalty for poor employment records…

An employer has been ordered to pay a $25,000 penalty after breaching employment law. The employer failed to provide staff with written employment agreements, failed to keep holiday and leave records, and failed to keep time and wage records.

A labour inspectorate visited the workplace and investigated the employer after receiving a complaint from one of the employer’s former employees.

The employer claimed that he was unaware of the law and did not know he had to comply with the minimum standards of employment as he was not proficient in English.

The Employment Relations Authority rejected those factors as mitigating circumstances.

Alan Knowsley

Employment Lawyer Wellington