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Forums For Adjudicating Employment Disputes

The Employment Relations Authority and the Employment Court both have exclusive jurisdiction to determine employment relationship problems. There are limited rights of appeal to the Court of Appeal (on matters of law only) and the Supreme Court.


The Main Sources Of Employment Law

Employment law obligations arise pursuant to legislation (particularly the Employment Relations Act 2000, Holidays Act 2003, Minimum Wage Act 1983, Wages Protection Act 1983, Equal Pay Act 1972, Parental Leave and Employment Protection Act 1987, Health and Safety at Work Act 2015, KiwiSaver Act 2006, and Privacy Act 2020), contractual terms, case law, or as a result of common law duties that apply to employment relationships.


National Law And Employees Working For Foreign Companies

Generally, the applicable jurisdiction is that recorded in the relevant employment agreement. If the agreement is silent, the proper law of the contract is inferred from the circumstances, or, failing that, the system of law with which the transaction has the closest and most real connection. Thus, in some circumstances New Zealand law governs employment relationships where the employee works in New Zealand even if the employer entity is foreign.


National Law And Employees Of National Companies Working In Another Jurisdiction

An employment agreement may record the applicable jurisdiction.


Data privacy

The Privacy Act 2020 applies. An employer must obtain prior consent, preferably in writing (for evidentiary reasons) before collecting and retaining information about a person. The employer must ensure that there are reasonable safeguards against loss, misuse or disclosure of the personal information, and that personal information is not kept for longer than needed for the purpose for which it was collected.

An employer must obtain customer consent to share any personal information with overseas companies. If an employer gets such consent, it must ensure that the company receiving the information protects it in a way that is consistent with New Zealand privacy law.

Legal Requirements As To The Form Of Agreement

Employment agreements must be written. An employment agreement between the employee and the employer is known as an individual employment agreement (“IEA”). An agreement between an employer and union is known as a collective employment agreement (“CEA”), which must cover two or more union members.


Mandatory Requirements
  • Trial Period
  • A trial period is only permitted if the employer has 19 or fewer employees (whether full time, part time, casual or otherwise) and is not mandatory.

    If a trial period is included in the employment agreement, employers may dismiss a new employee during a trial period. The trial period can be up to 90 days. The trial period must be agreed in writing in the employment agreement before the employment relationship begins. Notice must be given within the trial period, even if the new employee is not actually dismissed until after the trial period ends. If the above conditions are met the employee will have no entitlement to bring a personal grievance against the employer for unjustified dismissal (they may however raise a personal grievance on other grounds during the trial period).

    An employer who is prohibited from using a trial period may include probationary period provisions (which may include a shorter period of notice). However, unlike a trial period, when exercising a right to terminate pursuant to a probationary period provision, employers must follow a fair process and have a fair reason for dismissal (i.e. employers must comply with all usual requirements of a fair dismissal that would apply whether or not a probationary period was in place).

  • Hours Of Work
  • There is no statutory maximum on the number of hours that may be worked per week.

    There is no statutory entitlement to overtime.

    There is a prohibition on “zero hour” contracts that require a person to be available at all times to work without specifying minimum guaranteed hours and reasonable compensation for being available.

    Any provision in an IEA or CEA that provides an employer with the ability to require an employee to work hours in addition to their ordinary contracted hours constitutes an “availability provision” under section 67D of the Employment Relations Act 2000. Accordingly, the employment agreement and the provision must comply with section 67D. This includes providing the employee with reasonable compensation for their availability as a separate component from their remuneration for time worked.

    Rest breaks and meal breaks must be at least the period specified by the Employment Relations Act 2000. Generally, this provides that an employee who works eight hours a day is entitled to at least:

    -Two 10-minute paid rest breaks; and

    -A 30-minute unpaid meal break.

    These breaks must be provided at the regular intervals provided for by the Employment Relations Act 2000 (being halfway through each period of work and the next break or end of employment), unless otherwise agreed between the employer and the employee.

    Employers must keep accurate records of employees’ time worked and their remuneration paid and must keep those for at least 7 years after the employment has ended.

  • Special Rules For Part-time Work
  • Minimum employment rights and entitlements (including minimum wages, paid annual holidays and sick and bereavement leave) apply equally to part time employees.

  • Earnings
  • The minimum wage rates are reviewed every year. As at 1 April 2021:

    -The adult minimum wage is $20.00 an hour (before tax). There is no overtime rate – hours worked in excess must be paid at the minimum rate.

    -The Starting-Out and training minimum wages are $16.00 an hour (before tax), being 80% of the adult minimum wage. No overtime rates apply.

    Remuneration paid as a salary must not equate to a level below the minimum wage rate, taking into account the number of hours worked by the employee in any particular pay period.

    The Starting-Out wage is focussed on 16 and 17-year olds starting out in the workforce, 18 and 19 year olds who have been on a benefit for six months or more, and 16 to 19 year olds in training in a recognised industry training course.

    The training minimum wage applies to employees aged 20 years or over who are doing recognised industry training to become qualified.

  • Holidays/Rest Periods
  • Employees are entitled to a minimum annual paid holiday of 4 weeks per year provided that the employee has completed 12 months’ continuous employment. These entitlements accrue (do not expire and cannot be contractually forfeited if not used during the year in which they accrue) and are payable on termination to the extent they are not taken.

    If an employer and an employee cannot agree on when accrued annual leave is to be taken, the employer can specify when the employee must take annual leave, by giving the employee not less than 14 working days’ notice.

    Each year, 11 public holidays are observed in New Zealand each year, with an additional public holiday scheduled to begin in the year 2022, taking the total number of public holidays to 12 per year. Additional obligations/payments are payable if an employee is required to work on a public holiday.

    If a fixed term Employment Agreement is for a period of less than one year, the employee’s entitlement to annual holidays is usually provided for by adding 8% of the employee’s gross earnings as annual holiday pay to their pay (also known as pay-as-you-go leave). This amount must be shown separately on the wage record.

    Casual employees are still entitled to annual holidays. This is usually provided for by adding the 8% to their pay, on the pay-as-you-go basis.

    There is no statutory entitlement to long service leave.

  • Minimum/Maximum Age
  • Age discrimination is prohibited. There is no minimum or maximum working age. However, young people aged less than 16 years cannot work after 10pm, before 6am or during school hours.

    There are additional restrictions, under health and safety regulations, on the work that people under 15 years of age may do.

    While minors have capacity to sign employment agreements, only people aged 16 or over may be party to a settlement agreement.

    Employers of employees under 20 years of age must keep records of the employees’ age, address, and the date they commenced employment along with their time and wage records.

  • Illness/Disability
  • After 6 months’ continuous employment, an employee is entitled to 5 days sick leave per annum (which may accrue up to 20 days).

    Discrimination on the grounds of disability is prohibited. There is no separate disability leave entitlement. The Human Rights Act 1993 permits different treatment based on disability only where it is not reasonable to expect the employer to provide special services or facilities necessary to enable the employee to perform the duties of the position satisfactorily, or it is not reasonable due to risk of harm to that employee or others. These exceptions do not apply if the employer could, without unreasonable disruption, take reasonable measures to reduce the risk to a normal level.

  • Location Of Work/Mobility
  • The place of work must be recorded in the employment agreement.

  • Pension Plans
  • Superannuation is not compulsory in New Zealand. However, new employees will be automatically enrolled into KiwiSaver, a voluntary, work-based savings initiative setup between an employee and an employer to help with long term retirement savings.

    The current rate of compulsory employer contributions to KiwiSaver schemes (if an employee is making contributions) is 3% of an employee’s salary and wages.

    Compulsory employer contributions must be on top of an employee’s regular pay. However, a salary package can be negotiated whereby compulsory employer contributions can be offset against the employee's gross pay, under a “total remuneration approach”. Some employers consider this is fairer to employees, as it means that employees who have elected not to join KiwiSaver are not paid less than KiwiSaver employees.

  • Parental Rights (Pregnancy/ Maternity/ Paternity/ Adoption)
  • Minimum statutory entitlements to parental leave and job retention apply.

    Employers have a statutory obligation to provide appropriate facilities and breaks to an employee who wishes to breastfeed.

    After 6 months employment, paid (by the government) primary carer leave is up to 26 weeks, partner’s leave is up to 14 days.

    After 12 months employment, paid (by the government) primary carer leave is up to 26 weeks, partner’s leave is up to 14 days unpaid and unpaid extended leave is up to 52 weeks.

    In addition to any parental leave taken, female employees who are pregnant may take up to 10 days unpaid special leave for pregnancy-related reasons.

  • Compulsory Terms
  • Employment agreements must include:

    -Names of the employer and the employee;

    -A description of the work to be performed;

    -An indication of the place of work;

    -The agreed hours;

    -The wage rate or sale payable, and how it will be paid;

    -A plain language explanation of how to help resolve employment relationship problems, including advice that personal grievances must be raised within 90 days;

    -A statement that the employee will get (at least) time-and-a-half payment for working on a public holiday;

    -An employment protection provision to apply if the employer’s business is sold or transferred, or if the employee’s work is contracted out;

    -If to be applied to a particular employee, the applicable trial period, probationary period or availability provisions;

    -The nature of the employment, for example if the employment is casual or fixed term;

    -In the case of fixed term employment, must include the reasons for the employment being a fixed term;

    -If casual or fixed term employees are to be paid annual holidays on a pay-as-you-go basis (see Annual Holidays section below), the employment agreement must contain an agreement to this.

  • Non-Compulsory Terms
  • Parties cannot contract out of minimum statutory rights but are free to agree on enhanced entitlements or other contractual terms.


Types Of Agreement

The use of fixed term agreements is regulated. An employer must have a genuine reason for using a fixed term and the employment agreement must record when or how the employment will end and the reasons for it ending in that way. Failure to do so entitles the employee to challenge the validity of the fixed term and claim remedies, which may include permanent employment. Limiting or excluding statutory rights or establishing suitability for permanent employment is not a genuine reason.

Other types of agreement include permanent, casual or part-time employment.

For the first 30 days of employment, the individual Employment Agreement of a new employee who is not a union member but whose work is covered by a collective agreement (affected employees) must be on the same terms and conditions as the collective agreement. Additional terms and conditions may be negotiated in an individual employment agreement, so long as they are no less favourable than the collective agreement. This means that employers are unable to offer something different from (or less favourable than) the collective agreement when one would cover the employee's work if they joined the relevant union. It is a requirement for employers to issue affected employees with a prescribed "Active Choice Form" within 10 days of that employee commencing work.


Secrecy/Confidentiality

In the absence of an express term, a duty of confidentiality will be implied during employment to protect confidential information of the employer. Post-employment, an implied term of confidentiality will only protect highly confidential information such as trade secrets.


Ownership of Inventions/Other Intellectual Property (IP) Rights

Subject to any agreement to the contrary, where an employee makes, in the course of his or her employment, a literary, dramatic, musical or artistic work, the employer will be the owner of the work.

If the employee is the first owner of the copyright of the work, the employee may have moral rights to be identified as the author of the work and for the work not to be subjected to derogatory treatment.


Pre-Employment Considerations

The guidelines for completing a credit check provide that a pre-employment credit check may only be completed if the individual will be taking a position involving significant financial risk.

A criminal record check can be obtained by applying to the New Zealand Ministry of Justice. The Criminal Records (Clean Slate) Act 2004 allows individuals to legally conceal less serious convictions from their records provided they have been conviction free for at least 7 years.


Hiring Non-Nationals

It is an offence for an employer to employ a person who is not legally entitled to work in New Zealand. Non-nationals intending to work in New Zealand need a visa entitling them to work for, at least initially, a specific period. This may be subject to conditions, including as to minimum hours / minimum pay.

 

Hiring Specified Categories Of Individuals

There are no specific rules about hiring specified categories of employees.


Outsourcing And/Or Sub-Contracting/Temporary Agency Work

Duties to employees under the Employment Relations Act 2000 extend to “any person of any age employed by an employer to do any work for hire or reward under a contract of service”. However, an employer’s obligations occasionally extend further than this. Under health and safety legislation an employer owes duties to contractors and subcontractors in addition to employees.

A triangular employment arrangement typically arises where an employee is employed by one company or organisation, such as a hire or recruitment company, but works under the control or direction of a third party (Triangular Employees). New legislation allows Triangular Employees to join a controlling party (who is not their formal employer) to a personal grievance claim (and if upheld, that controlling third party may also be responsible for lost wages and/or compensation).

Changes To The Contract

Contractual terms cannot be unilaterally varied. Changes can only be made by agreement.


Change In Ownership Of The Business

A transfer of shares only does not affect the employment relationship or create a redundancy situation. A change in ownership of the business by asset sale results in a technical redundancy.

A two-tier system of employee protection deals with continuity of employment if a business is restructured. A restructuring includes the sale of the business (not shares), transfer, contracting out and (in the case of vulnerable employees only) contracting in, or termination of a contract if the work continues to be carried out:

-“Vulnerable employees”, namely those working in the food catering and cleaning industries or in caretaking or laundry services, have statutory protection. These employees may elect to transfer to the new employer on the same terms and conditions of employment, with continuous service being recognised. Vulnerable employees may bargain with the employer about alternatives to transferring or redundancy entitlements.

-The rights of all other employees are governed by the mandatory employee protection provision in their employment agreement relating to negotiations between the employer and the new employer about the transfer of affected employees to the new employer.

Employers have a duty of good faith to consult with employees over the proposed change of ownership of the business (not shares) before it occurs.


Social Security Contributions

Superannuation is not compulsory in New Zealand. However, new employees will be automatically enrolled into KiwiSaver, a voluntary, work-based savings initiative setup between an employee and an employer to help with long term retirement savings.

The current rate of compulsory employer contributions to KiwiSaver schemes (if an employee is making contributions) is 3% of an employee’s salary and wages.

Compulsory employer contributions must be on top of an employee’s regular pay. However, a salary package can be negotiated whereby compulsory employer contributions can be offset against the employee's gross pay, under a “total remuneration approach”. Some employers consider this is fairer to employees, as it means that employees who have elected not to join KiwiSaver are not paid less than KiwiSaver employees.


Accidents At Work

Under the Health and Safety at Work Act 2015, work related events that meet the definition of a “notifiable event” must be reported to WorkSafe to investigate.

An employer may be prosecuted for failing to take all reasonably practical steps to prevent an employee (or any other person affected by the employer’s operations) from risks to their health and safety.

Under the Accident Compensation Act 2001, the Accident Compensation Corporation provides personal injury cover to all New Zealand employees irrespective of where fault lies, and employees are barred from bringing legal proceedings against the employer in respect of the personal injury.


Discipline And Grievance

Employees are afforded the right to challenge the actions of their employers. Ultimately, any action (including dismissal) must be both substantively and procedurally fair. If not, the employer may be liable for a claim of unjustified disadvantage, or unjustified dismissal.

Personal grievances must be raised by the employee within 90 days of the action complained about arising or becoming known by the employee. Any employee can raise a personal grievance – there is no minimum or maximum wage/salary threshold.

Common law rules of natural justice apply to disciplinary action.

If an employee succeeds in a claim for unjustified dismissal, the Employment Relations Authority and Employment Court have a wide discretion in respect of the remedies that may be ordered, including reinstatement (where requested by the employee, lost wages, compensation, costs, and penalties.


Harassment/Discrimination/Equal pay

It is unlawful for an employer to offer different terms or conditions of employment to, or discriminate against, a person by reason of that person’s sex, marital status, religious or ethical belief, colour, race, ethnic or national origins, disability, age, political opinion, employment status, family status, sexual orientation, refusal to do work likely to cause serious harm or involvement in the activities of a union.

Sexual and racial harassment is prohibited.

The Equal Pay Act 1972 specifically forbids sex discrimination in remuneration.


Compulsory Training Obligations

There are no compulsory training obligations generally, but some trades/professions have entry and continuing training standards.


Offsetting Earnings

A deduction from an employee’s wage/salary requires the employee’s prior written consent (and this consent may be withdrawn by an employee at any time).


Payments For Maternity And Disability Leave

The government makes maternity and disability payments. During parental leave all other entitlements, excluding wages and salary payments, continue. Also refer to Parental Rights in section 2.


Compulsory Insurance

Employers pay an Accident Compensation Corporation levy for workplace injury cover. See also Accidents At Work in this section.


Absence For Military Or Public Service Duties

Members of the territorial forces and reserve forces volunteers in civil employment are protected from dismissal during periods of service and training.


Works Councils or Trade Unions

Trade union membership is voluntary. Unions must be registered.


Employees’ Right To Strike

Parties to a CEA may take lawful strike action in relation to bargaining for a new CEA or over health and safety issues.


Employees On Strike

Employees participating in a lawful strike action cannot be dismissed.


Employers’ Responsibility For Actions Of Their Employees

Employers may be vicariously liable for an employee’s actions.

Procedures For Terminating the Agreement

Contractual termination procedures apply to a termination by the employer. Dismissals must be substantively justified and carried out in a procedurally fair manner. The question of whether a dismissal is justifiable is determined on an objective basis by applying the test of whether the employer’s actions were what a fair and reasonable employer could have done in all the circumstances.

The exception is that it is permissible for dismissal to occur without justification at any time within a valid trial period of up to 90 days, provided the dismissal occurs within any agreed contractual terms surrounding the trial period.

Prior to dismissing an employee on the basis of unsatisfactory work performance, the deficiencies must be disclosed to the employee and a reasonably specific and measurable improvement demanded of them within a reasonable period of time. At the end of this time, dispassionate consideration must be given as to whether enough progress has been made to avert dismissal. The employer must follow procedural requirements for disciplinary meetings to terminate employment on this basis.

A decision to make an employee redundant must be both genuine and procedurally fair. A redundancy will be genuine if it is made for valid commercial reasons. Consultation must be conducted prior to any decision in respect of a redundancy proposal being made.


Instant Dismissal

An employee may be dismissed without notice for serious misconduct, being conduct that fundamentally undermines the employer’s trust and confidence in the employee. If permitted by the Employment Agreement, it will usually be appropriate to suspend an employee on pay in the first instance in order to conduct a fair investigation into the serious misconduct prior to making a decision to dismiss the employee. A fair investigation requires all relevant information to be provided to the employee (including details of allegations made and who has made them), and for the employee to have an opportunity to respond to the allegations.

Where there has been termination with immediate effect, the employee should be paid up to the day of dismissal, including any holiday pay owed.


Employee's Resignation

The Employment Agreement can be terminated by the employee by giving the notice stipulated in the Agreement.


Termination On Notice

Notwithstanding the termination provisions contained in the Employment Agreement, after any applicable trial period has finished there is no ability under New Zealand law for an employer to terminate an employee at will. “Irrevocable Differences” and similar clauses that may be common in other jurisdictions are not enforceable in New Zealand. Termination by the employer on notice (giving the employee) the notice period specified in the Employment Agreement, can only occur if the termination is substantively justified (e.g., serious misconduct, poor performance, redundancy, medical incapacity, etc.). If the Agreement permits, the employer may make a payment in lieu of some or all of the notice.

There is no minimum notice of termination required under New Zealand law. 4 weeks, or more for senior employees, is common.


Termination By Reason Of The Employee's Age

Age discrimination, including compulsory retirement (except in some very limited occupations) is prohibited.


Automatic Termination In Cases Of Force Majeure

Frustration of contract rules applies to major events such as death, or destruction of the workplace.

There is no unilateral ability to stand down employees in the event of access to the workplace being temporarily restricted, unless specified in the Employment Agreement. Any changes to employment terms in this situation must be agreed between the employer and the employee.


Collective Dismissals

Collective action (e.g., redundancy of an entire workplace due to closure of business) must follow the requirements that apply to any individual situation, including obligations as to consultation. There are no specific requirements, and group consultation meetings are permissible (although an employer must act reasonably if an employee requests an individual meeting).


Termination By Parties’ Agreement

The parties are free to terminate the employment by mutual agreement.


Directors Or Other Senior Officers

Directors’ or senior officers’ employment may be terminated in the same way as other employees. Dismissal will not end the employee’s status as a director of the employer company.


Special Rules For Categories Of Employee

There are no special rules for categories of employee, except in relation to ‘vulnerable employees’ as set out in Change In Ownership Of The Business in section 3 above.


Whistleblower Laws

Whistleblowing is covered by the Protected Disclosures Act 2000. An employer cannot take disciplinary action against an employee who makes a protected disclosure under the Act. A protected disclosure is a report of serious wrongdoing in the workplace which the employee reasonably believes is true or likely to be true.


Specific Rules For Companies in Financial Difficulties

Various statutory regimes may be applied to an insolvent business, under which employees may become preferential creditors for wages, salary, redundancy compensation and other employment entitlements. There are no specific rules in respect of termination, with the usual requirements continuing to apply.


Special Rules For Garden Leave

If the employment agreement does not have a garden leave provision, an employer cannot put an employee on garden leave without their consent. An employee on garden leave must still comply with all their terms and conditions of employment.


Restricting Future Activities

Restraint clauses are not implied into employment agreements and must be express contractual provisions, and must be “reasonable”, in order to be enforceable. A restraint clause that seeks to protect a legitimate propriety interest may be upheld provided that the restraint is no more restrictive than is necessary and reasonable (in terms of geographical location, time, and duration) to protect the legitimate interest.


Severance Payments

Contractual provisions apply. There is no statutory right to severance pay or redundancy compensation.


Special Tax Provisions And Severance Payments

There is a special tax concession for some amounts paid in settlement of personal grievances as compensation, but otherwise severance payments are taxable.


Allowances Payable To Employees After Termination

There is no specific statutory entitlement to allowances or specific benefits.


Time Limits For Claims Following Termination

Personal grievance claims must be raised with the employer within 90 days of the problem arising or becoming known to the employee. The employee must file legal proceedings with respect to the personal grievance within 3 years of the personal grievance having been raised.

Claims following termination that are not personal grievances, such claims for arrears of wages, may not be brought later than 6 years after the date on which the cause of action arose.

Specific Matters Which Are Important Or Unique To This Jurisdiction
Good Faith

Pursuant to the Employment Relations Act 2000, New Zealand employment law is subject to an overriding statutory good faith obligation (for both employee and employer) which applies to all aspects of the employment relationship, including in connection with the initial offer of employment, disciplinary actions, and termination of the employment relationship by an employer.

Generally speaking, New Zealand law is protective of employees. In New Zealand the employer’s right to manage is not paramount. It is subject to, among other things, obligations to employees in connection with the provision of information, rights of consultation, fair investigations, allowing feedback and rights to respond.


Family Violence

Employees who are affected by family violence (i.e., whether they or someone they care for are subject to family violence) are entitled to:

-Up to 10 days’ family violence leave each year (in additional to sick leave and holiday leave);

-Request short-term variations to their employment arrangements to help them deal with the effects of family violence.

Adverse treatment because an employee is a person affected by family violence is a ground for a personal grievance.


Employee Shares

Equity incentive plans are governed by New Zealand’s complex securities law regime. Various exemptions under the Financial Markets Conduct Act 2013 may apply, however there is no general exemption applicable to employees.


Employee File

All employers to maintain an up-to-date employment file on each employee. The file must contain a copy of the employee’s signed employment agreement, together with the employee’s letter of offer/appointment and evidence of right to work in New Zealand, if applicable.

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Contact a Contributing Author:
Mark Hammond
Tompkins Wake
New Zealand


Kerri Dewe
Tompkins Wake
New Zealand


Karina McLuskie
Tompkins Wake
New Zealand

Disclaimer:

© 2021, Tompkins Wake. All rights reserved by Tompkins Wake as author and the owner of the copyright in this chapter. Tompkins Wake has granted to Multilaw non-exclusive worldwide license to use and include this chapter in this guide and to sublicense Lexis Nexis, a division of RELX Inc. and its affiliates certain rights to use and distribute this Guide.

The information in the How to Hire and Fire Guide provides a general overview at the time of publication and is not intended to be a comprehensive review of all legal developments nor should it be taken as opinion or legal advice on the matters covered. It is for general information purposes only and readers should take legal advice from a Multilaw member firm.

Publication Date: June 2021