SME test returned for 90-day rule

​Labour has stepped back from its election policy in this first tranche of employment reforms in relation to the 90-day rule and has basically restored it to the format National adopted when it first introduced the regime.

The other provisions in the Employment Relations Amendment Bill summary released today roll-back other changes introduced by National which Labour considers unacceptably diluted employee and union rights.

We list the changes and provide a brief commentary.

Overall, the changes are in line with what we were expecting and suggest that Labour has approached this on a pragmatic basis given the modifications to its pre-election position.

Other positive signals are its willingness to engage on the detail and to hold off on changes where further consultation is required with affected industries (e.g. the Hobbit law and sector-wide fair pay agreements).

Employee rights

Ninety-day trials will be limited to employers with fewer than 20 employees. This was the policy as first introduced by National but later extended to all employers. It is less than Labour campaigned on, which was to give workers a right to challenge an unjustifiable dismissal within the 90-day period.

Statutory meal and rest breaks will be restored, subject to a very limited exception for workers in essential services – e.g. air traffic controllers. This change is likely to result in the reintroduction of the prescriptive regime – e.g. 10 minutes break after two hours etc – that National had removed and which had caused a number of problems in some sectors. The right to adequate breaks has always been required as part of the employers’ health and safety obligations.

Reinstatement will be restored as the primary remedy for unfair dismissal. This will up the ante for employers in these disputes.

The SME exception from the protections applying to workers in “vulnerable industries” (e.g. cleaning) in the event of a transfer of ownership will be removed.

Collective bargaining and union rights

These changes were well signalled in advance and largely undo reforms under National.

  • The duty to conclude bargaining unless there is good reason not to will be restored as will the earlier initiation timeframes for unions.
  • The opt out provision enabling employers to refuse to bargain for a multi-employer collective agreement will be removed.
  • The 30-day rule under which new hires must be employed under terms consistent with the prevailing collective agreement will be restored.
  • The right for an employer to apply partial strike pay reductions will be removed.
  • Unions will recover the right to access workplaces without prior employer consent.

New proposals

Collective agreements will be required to include pay rates, although these may be expressed as ranges or methods of calculation. This is already reasonably common practice.

Employers will be obliged to allow reasonable paid time for union delegates to perform their union duties. These arrangements are often negotiated now as part of the collective bargaining process.

Employers will be required to provide information about unions in the workplace to prospective employees along with a form to indicate interest in joining the union. This slightly extends obligations that already exist to provide information about existing collective arrangements.

Stronger anti-discrimination provisions for union members will be imposed, including an extension of the 12-month threshold to 18 months relating to discrimination based on union activities and new protections against being discriminated against for being a union member.

Next steps

The legislation, not currently available, is expected to have its first reading early next month. We expect it will come into force from 1 April and will apply to employment agreements settled on and from that date.

The proposals should not cause most businesses much concern but we will need to see the Bill before we can make firm judgements on how they will operate and affect existing practice.

There is further – and more far-reaching - reform to come, relating to Labour’s proposed fair pay agreements.

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Related topics: Employment; Employment law reform

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