Labour law changes will bring improvement for employers

The employment law changes announced by the Prime Minister at the weekend are not radical but will bring some real improvements for employers.

This Brief Counsel looks at the reform agenda and, although details are light so far, provides a preliminary assessment of some of the likely implications.

The proposed changes 

  • Extending the 90 day grievance-free trial period, currently only available to small businesses, to all employers.  Employers are likely to need a specific clause in their agreements to access this right.

  • Ensuring that employer disciplinary/dismissal processes are not subject to “pedantic scrutiny.”  The Government has said it will reverse moves by the Labour Government in late 2004 which make it harder for employers to justify dismissals and warnings.

  • Reforming the Employment Relations Authority:

    • enabling the Authority to filter out vexatious or frivolous claims early on, and

    • moving the Authority to a more “judicial mode operation,” with parties’ right to cross-examine witnesses.

  • Union access/communication: 

    • making it easier for employers to regulate union access to workplaces.  Currently union access is relatively unfettered.  Access will require employer consent, but this consent will not be able to be unreasonably withheld, and

    • giving employers the right to communicate directly with their staff while bargaining is underway, including talking to employees about the terms of any settlement proposal.

  • Leave:

    • allowing employees to trade one of their four weeks annual leave for cash (only at the employee’s request, and the matter cannot be raised in salary negotiations)

    • enabling employers to ask for proof of sickness or injury earlier, so long as they meet the employee’s costs in obtaining proof (at the moment employers can only ask for a medical certificate if the illness is longer than three days, or if the employer has reasonable grounds to suspect that the leave is not genuine)

    • introducing a new concept of “average daily pay” (based on the employee’s average pay over the past year) which will be used to calculate entitlements under the Holidays Act 2003

    • allowing employers and employees to agree to transfer public holidays to another working day, and

    • doubling maximum penalties where employers don’t comply with the Holidays Act.


Some employee groups will argue that these reforms will shift the balance of power back towards employers in some key areas.  But they do not represent a radical reversion.  Instead they are, as the Government says, targeted changes which will deliver some real improvements for employers.

Predictably, much of the media attention and public comment has been focussed on the extension of the 90 day trial period to all employers.  Employees dismissed in reliance on that trial period cannot dispute their dismissal, although they remain entitled to fair treatment during the trial period.  The reality though is that such employees will now have few, if any, rights if they are dismissed.  Even a successful claim of unjustified treatment cannot secure either reinstatement, or compensation for loss of employment. 

Is the trial period open to abuse, as critics suggest?  It depends what is understood by ‘trial’:  unless an employer is using the period for collateral purposes, in which case the Fair Trading Act presents a meaningful discipline, any suggestion of ‘abuse’ would seem to assume a ‘right’ to continued employment, which is the antithesis to a trial period.

The Government’s proposed tweak to the personal grievance laws (which apply after the 90 day trial period has expired) should make a real difference in borderline cases.  This change will not affect the employer’s obligation to follow a fair process, but employers will not be required to justify the dismissal by other than reliance on the existence of a written trial period.

Next steps

We will follow developments with interest and will update you when the legislation is released.  In the meantime, for further information or advice, please contact one of the lawyers featured.

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Related topics: Employment; Employment law reform


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