Employment legislation changes.
A reminder that April is bringing new legislative changes that could impact your business. The key changes employers need to know about include minimum wage, zero hour contracts, overtime hours, secondary employment, shift cancellation and record keeping.
Minimum wage changes:
Employers should note that there will be an increase in the minimum wage rates, which will apply to all employees who are aged 16 years and over.
From 1 April 2017 the minimum wage will increase from $15.25 per hour, to $15.75 per hour. The rate for the starting-out and training minimum wage will also increase from $12.20 to $12.60 per hour, which remains at 80% of the adult minimum wage.
For every hour worked the employees must be paid at least the minimum hourly wage rate for every hour worked. Below is a table including this information:
| Employment Type | Rate per hour (before tax) |
| Adult | $15.75 |
| Starting-out | $12.60 |
| Training | $12.60 |
Employment agreement updates:
All employers need to update their existing employment agreements to comply with the recent legislative changes that are effective from 1 April 2017. These new changes aim to ensure that New Zealand workplaces are fair and productive. The parts of the Employment Relations Act which have been modified are the zero hour contracts, overtime hours, secondary employment and shift cancellation sections.
Zero Hour Contracts:
The new changes have removed zero hour contracts, meaning employees must now have guaranteed hours and reasonable compensation for availability. The key changes to this clause are:
- Every employee must have a written employment agreement, and employers are required to retain a signed copy of the agreement.
- All employment agreements must state the set amount of hours the employee is required to work as agreed between the two parties.
Overtime Hours:
Another of the key changes surrounds overtime hours. Employees are no longer required to be available for ‘reasonable overtime’ or ‘additional hours’. For an employer to have the ability to require an employee to work additional hours (anything above the set hours), it must be stated in their employment agreement and meet the requirements stated by the ERA.
- Employers must not require employees to be available above their agreed hours without a genuine reason, and offering reasonable compensation (this may be reflected in their agreed salary).
- To include a clause in an employment agreement requiring an employee to be available for additional hours, the employer must have a genuine reason based on reasonable grounds, and clearly state the number of additional hours they would be required to work.
- Regardless of whether the additional hours are worked or not, the employer must provide compensation to the employee for making themselves available to work above their agreed hours.
- Unless stated in a clause, an employee is entitled to refuse working any hours above the hours stated in their employment agreement.
Secondary Employment, Cancellation of Shifts, and Record Keeping:
Other key changes are secondary employment, cancellation of shifts, and record keeping. Firstly, employers are now prohibited from placing unreasonable restrictions on secondary employment unless they have a genuine reason. Examples of genuine reasons could include loss of knowledge, intellectual property, and commercial reputation to the employer as a result of an employees secondary employment. If this is the case, then the reasons must clearly outlined in the employment agreement.
Secondly, an employer is not able to cancel an employee’s shift without reasonable notice, or compensation. It is required that employers record notice periods, and compensation rates in the employment agreement.
Lastly, the new legislation requires employers to have an adequate process for recording the number of hours worked per day in a pay period, and the pay for those hours. This requirement ensures that records can be easily accessed on request from either an employee or the Labour Inspector.
What happens if I do not comply with these changes?
If an employment agreement is not updated to comply with these new changes, then the non-compliant clauses (e.g. secondary employment clause, availability provisional clause etc.) will become void. In addition to this, the employer risks receiving a personal grievance claim from the employee. If an employer tries to enforce a clause which does not meet ERA requirements, then they risk Labour Inspector action which can ultimately result in a penalty of up to $20,000.
What are my next steps?
Employers should ensure that all their existing employment agreements comply with these new requirements. Please note that employers are unable to require employees to sign an employment agreement, without first agreeing to the changes.
Employees should consider the extent of the changes, and whether the employee should receive a bonus or pay rise as reasonable compensation. Another important factor to consider is the timing, and explanation of the changes.
For further Commercial Law advice, get in touch with the Commercial Law Team.
