Employment law shake up

Prohibition of Zero-Hour Contracts and Other Unfair Practices


Recent changes to employment legislation aim to promote fairer and more productive workplaces by providing enhanced protections and benefits for both employers and employees.  The most significant changes are summarised here.

Zero Hour Contracts

It is now prohibited for an employee to be placed on “zero hour” contracts (an arrangement where an employer does not commit to a minimum number of hours but an employee is required to be available for work), unless the employer complies with the new rules.

The employer must have genuine reasons (such as genuine business demands) for such a provision, and employees must be reasonably compensated for making themselves available.  For salaried employees, it can be agreed that this compensation is included in salary payments. 

If there is no genuine reason for an availability provision in an employment agreement, the employee can refuse to work and not face any consequences.

Cancelling a shift

Where an employment agreement requires the employee to undertake shift work, a reasonable period of notice for cancelling a shift must be specified in the employment agreement, together with reasonable compensation that must be paid by the employer if the shift is cancelled without giving the specified reasonable notice.  If the specified notice is not given before the start of a shift, then an employer must provide reasonable compensation.

If the shift is cancelled without notice, and the employment agreement does not comply with the legislative provision, an employee is entitled to what she/he would have earned.

Prohibiting unreasonable restrictions on secondary employment

Under the new provisions, employers are prevented from restricting secondary employment for employees unless they have a genuine reason based on reasonable grounds to do so, and the reasons are stated in the agreement.

Deductions from wages

Under the Wage Protection Act an employer could make deductions from wages if an employee consented in writing (such as via their employment agreement). 

The amendments now require the employer to consult with the employee before making a specific deduction, even if the employee has given general consent to lawful deductions in their agreement.  The amendments provide that even where there is consent, a deduction must not be unreasonable.

Individual agreements in force before 1 April 2016 that do not comply with the new rules will need to be varied before 1 April 2017 to ensure compliance.


Penalties for Non-Compliance

Employers will be publically named if the Employment Relations Authority or Employment Court finds that they have breached minimum standards.  There are also significant penalties for non-compliance.

Where an employer has breached minimum entitlement provisions and the breach is serious, a Labour Inspector can apply to the Court for a declaration of breach against the employer and any relevant Officer (an Officer includes a director or partner of the employer and someone that can exercise significant management or administration influence such as a CEO).  Once a declaration of breach has been made, the Court can then make all or any of the following orders against the Officer or employer:

ŸŸŸ> Fine – $50,000 for individuals (such as a CEO) and $100,000 for the employer or three times the amount of the financial gain made by the employer from the breach;

> Compensation order – this is where the employee(s) affected by the breach have, or are likely to, suffer loss or damage. 

> Banning order – the Court can ban a person 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.  A banning order can last for 10 years.  A breach of a banning order will attract a fine not exceeding $200,000, or a term of imprisonment not exceeding 3 years or both.

Changes to Paid Parental Leave 

Paid parental leave has been extended from 16 weeks to 18 weeks from 1 April 2016, including extended eligibility for those who have primary care responsibilities (beyond natural or adoptive parents) and those who have worked for less than 12 months for the same employer.

The changes also introduce more flexibility to the paid parental leave regime, allowing workers on parental leave to “keep in touch” and work up to 40 hours in total during the 18 weeks of paid leave by agreement with their employer.

The new law extends the period of parental leave payments for parents of preterm babies. These parents can receive additional weekly payments (up to a maximum of 13 weeks) for each week the baby was born prior to the 37 week gestation period.

Workers will also be able to resign during the period of parental leave and still receive payments.

Strengthened Enforcement of Employment Standards

Employers who breach employment standards face tougher sanctions under the new laws.  Employers will need to keep detailed records of hours worked by all employees.  For employees who work regular hours each day for regular pay, this should be set out in the employment agreement.  However, if employees do not work regular hours, an accurate record of the hours worked each day and the pay received for those hours will be required.  If employers do not keep adequate records, they face infringement fees of up to $20,000, or $1,000 per breach.